Current Office Market Conditions H2 2021
Excess available Office space clearly means greater leverage for Office users with unique opportunities as a result of the pandemic. The Q2 2021 Office sector has continued to struggle although Q2 leasing activity has increased over the past quarter by 16% and nearly doubled over Q2 2020. Renewal activity made up half of the demand of total leasing activity in Q2. Total availability now is nearly 23% – a jump from 18.6% pre-pandemic (Q1 2020). Ask rents for the state average are $28.90/sf Gross, increasing from $28.59 one year ago. Sublease space can offer affordable options and represents 17.2% of total available space – the most since 2009.
As Tenants calculate their space requirements during this time of uncertainty, but often faced with a decision necessity, high-density users must face the reality that more space per employee will be required to outfit their office as often an office re-design will be necessary to ensure employee safety, satisfaction and retention. Employees are slowly returning to the office in many industries and many or most will likely have a hybid work remote/ in-office arrangement.
We encourage Tenants to consider the advantages of extending existing lease terms and negotiating to upgrade their existing space now, even if their lease expiration is 2+ years out. Tenants can now maximize their leverage for the best lease terms and concessions available in the past 10 years. This is an excellent time to find out what opportunities are available to a) renew and extend the term of existing premises, b) relocate to a higher-end building for better space at a discounted price or c) expand in their current building. For example, many Landlords are offering substantial concessions in the form of Tenant Improvement dollars, free rent periods, reduced rent and even short term leases.
Example large leasing deals for the quarter: Atlantic Health System and WebMD – underscoring the trend that many Office tenants have re-engaged the market and more are poised to do so in the coming months.
Current Trend: New available blocks of space, including the rate of sublease listings has recently slowed. The Office sector is showing signs of a recovery and oversupply of vacant space has peaked. Don’t delay seeing opportunities.