Starboard Commercial Real Estate

Hans Hansson | April 16, 2010

As we approach the end of the first quarter, office and retail leasing is showing strong signs of recovery-the phones are ringing again at commercial real estate offices.

Activity is strong for a variety of reasons. Rental rates in Class A offices are continuing to drop. This has created opportunities for firms currently in Class B buildings to upgrade to better offices for below their current rental rates. Along with this, smaller firms are enjoying opportunities to secure new offices in older buildings, and they are doing this at rates not seen since the dot-com crash of 2001.

This does not bode well for landlords however. With operating expenses running in the high teens for most Class A buildings, a high 20's to low 30's rental rate makes it difficult to make deals that require large amounts of tenant improvements. Building owners are turning to building out more spec suites to keep tenant improvements under control; this done by improving second-generation space with new paint, carpet, and lighting & ceiling systems. However, even with these cosmetic improvements, landlords are still spending $20 dollars per square feet or more to create these ready to lease spaces.

Tenants are also more willing to lock in these rental rates over longer lease terms. 7-year lease terms are becoming more common than 5-year lease terms with both landlords and tenants willing to commit to these terms to allow more time to amortize tenant improvement costs, as well as, allowing tenants to lock-in long term savings in rent.

Lenders are also more willing to allow landlords the flexibility to make longer-term deals, even though these low rental rates will present future problems in creating acceptable building values to support current loans on these properties.

In the retail market, single and smaller regional retailers are enjoying expansion opportunities in locations that previously would only consider large national firms. Rental rates are dropping, landlords are willing to commit to tenant improvements, that in the past, they would not consider for retailers in order to secure tenants.

Although this activity suggests good times ahead-without job growth, everything could slow down quickly again. Predictions are still for an unstable year, but certainly better than 2009-thank god!
Posted 9 years, 6 months ago on April 16, 2010
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Comments on this post:

Re: So Far So Good for Office Space Leasing in 2010
There are some repots which are that the rental and leasing sector of real estate market is showing some recovery in the first quarter of this year. People are looking for appropriate places for their offices and they want to invest at moderate prices. The analysts are also saying that the selling prices of property will further decline and this sector will take more time to recover.

2010/04/28 by Commercial Properties wwwReply
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Re: So Far So Good for Office Space Leasing in 2010
Rental and leasing rates are dropping continuously which is why it is the best time for class B offices to situate to a spacious building. I would suggest that class B offices should take advantage of this situation for their benefit.

2010/05/26 by Dubai Business wwwReply
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Re: So Far So Good for Office Space Leasing in 2010
We are talking about commercial real estate offices or commercial property, mostly we rent offices but I think a better way to run our business in a commercial way is that we should lease our offices; right now rates for rent and leasing are at their lowest since 2001. This does not bode well for landlords.+

Now the time is right for single and smaller retailers or business men to lease office at lengthier terms so that they can benefit from this situation for a foreseeable future.

2010/05/26 by Abu Dhabi Business wwwReply
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Re: So Far So Good for Office Space Leasing in 2010
The selling and buying sector of property is facing slump. But rental and leasing property is improving day by day in 2010. This is the better time for investors to invest in leasing Property and government take some attention for the proper growth of market.

2010/05/26 by Property Directory wwwReply
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