Pre-Building Space is No Longer a Slam-Dunk!

Not withstanding the all-time high cost of interior construction ($80 per rsf to $120 per rsf on average), commercial building owners are pre-building office space at a fever pitch.  * Please note that RSF (which includes a loss factor for mechanical areas, hallways, columns, convectors spaces currently averaging in Manhattan 27% to 37%) means Rentable Square Foot, which is the amount that the base rent and other expenses are based on.  A pre-built is defined as a demised space that is designed and built prior to a tenant showing any interest whatsoever.  Historically we saw spaces that were 1,500 feet to 4,500 feet being constructed but now we are seeing 10, 12 even 25,000 foot spaces readied for immediate occupancy.  Past thinking was that if the market was slow or a large floor was not leasing a pre-build program would be initiated by breaking up the floor into smaller units.  I believe that the new trend for pre-building larger spaces, even entire floors, are due to a slower pace of deal-making overall as well the landlords acknowledgement that many space users do not have the time, interest or money to design and build themselves.  Some landlords are furnishing the premises as well to entice the end user even more.  In addition office building owners are under tremendous pressure to answer the competition coming from the co-working companies and managed office suite firms that offer beautiful, plug & play space with many inducements like free rent, a concise lease/lisence document and a much smaller security deposit.  It is certainly a new office leasing landscape that you will need to navigate!  Contact me at mmiller@mhpnyc.com for a confidential conversation.