When?

The gap is widening.

The financial services world has continued to satisfy its appetite in the leasing sector while most businesses wait it out.?Dare I say we’ve seen it all before.?Reluctance and hesitation rarely win, but it depends on what you want.?Everyone is in the risk management game right now.?

The last 6 months I’ve been explaining to executives, either you’re going to have to take a little risk now or sit and wait it out like everyone else.

The leasing barometer has a common theme these days; blue chip businesses absorbing all the headlines with splashy lease commitments;

• Clayton Dubilier & Rice Doubling HQ in Move to 144K SF at 550 Madison
• Grosvenor Capital Management, 40,000 sf 15 yr renewal at the GM building
• Angelo Gordon expanded at 245 Park Ave for 8 more years
• Vontobel Asset Mgmt. inked a 12 yr lease at The Spiral/66 Hudson Blvd
• Greenlight Capital renewed for 10 more years in Grand Central
• LVMH close to finalizing its lease at 550 Madison Ave

Long term, big rents, bigger concession packages – all designed as additional incentives to get companies to lease space.?What do the average concession packages look like?

YTD;

$128.00 psf average Tenant Improvement allowances

11.5 months free rent on 10-year leases

Perhaps the bigger item on the horizon is all the Commercial Debt maturing for landlords in the next few years.?Some will be in a position to refinance, most wont.?Valuations and underwriting will depend largely upon occupancy rates which is why we’re seeing every major landlord invest heavily in amenities to lure tenants ahead of time to strengthen their balance sheets:

Industry chatter suggests a bottleneck of demand over the coming 12-24 months as the market stabilizes and demand slowly creeps up as rates fall, assets trade hands and businesses’ organic expirations occur prompting action.?Between now and then some will take a chance on office plans.?

So what questions am I being asked at the moment?

• Busiest part of town - Grand Central and the Park Avenue corridor have been the benefactor of One Vanderbilt’s success as well as the LIRR opening in Grand Central Terminal.?JP Morgan’s new HQ was perhaps well timed after all.?
• Quietest part of town – Downtown – if you’re needing commodity space at a deep discount, take your pick.
• Demand size - Anything under 15,000 sf or 50-person offices.?
• Areas in trouble – anywhere that requires a long walk or subway change to get to/from mass transit.?Worse yet if you’re in a building with little to no amenities.?Think XYZ east/west XYZ street.
• Personal project updates – every sublease I am handling has a Proposal in – sign of a changing tide or are those tenants simply forced into action (expiration driven, must have an office etc.).

What would I do if I was making a decision for my business??

Be active and get educated on the market.?Better yet, look at the value (or not) that the office provides as a productivity tool for the business.?If viewed as a critical component going forward, then I’d double down on my commitment (not necessarily size) and seek out the most advantageous opportunities and terms.? If I’m bearish on the 3–5-year window for employee productivity and occupancy, then I’m holding out until that perspective changes or my business suggests otherwise. Either way - get active now.

Inaction isn't the solution but its become an easy de-facto response to this new office environment.

People think brokers are biased, particularly in weak markets as they scramble for any signs of activity.?I’ve always provided data points to support an opinion – that’s what I’m hired for – for my opinion, and to guide businesses through real estate decisions.?My one constant since early 2020 has been for businesses to remain nimble and educated.

There remain bright spots of opportunity for those who seek it and for those well capitalized to commit.?For the rest, it becomes a game of patience and preparation for when the next wave of market activity occurs.?

The continuing unanswerable question…..

When?

OP

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