While the residential and industrial property markets sizzle, the office market has suffered immensely as Work-From-Home (WFH) arrangements and the COVID-19 pandemic continue to drag on. Empty offices have prompted several high-profile tenants such as Sales Force, Pinterest, JP Morgan and Twitter, among others to either terminate their leases or offer their office space on the market as sublease space.
As such, a growing number of commercial landlords are resorting to somewhat desperate measures to entice tenants to sign long-term leases, according to a new report by commercial real estate firm CBRE.
The average amount of free rent that office landlords offered to secure long-term leases in the U.S. climbed to 12.5 months in the first quarter, up 29 percent from a year earlier, says CBRE.
Meanwhile, tenant-improvement allowances – money that landlords provide tenants to fit out the interior of their offices – have held steady at an average of roughly $70 to $75 per sq. ft. These statistics are for newly signed leases of at least 10 years in term.
“Companies seeking long-term leases will find that asking rents haven’t come down much, but overall concessions have increased,” said Whitley Collins, CBRE Global President of Advisory & Transaction Services. “Those willing to get out in front of the full economic recovery can expect most landlords to be very accommodating.”