We are starting to see the office market shift that many of us predicted back in spring. While deals are still happening, vacancies are growing at a swift rate. Personally, our brokerage has received nearly a dozen requests to list office space for lease this week (the week of November 16th). That’s an incredible amount of inbound inquiries for a boutique brokerage like mine. As for what to do, I’m providing you with my insights below.
For landlords/sellers, I’m not trying to sound alarm bells, but now is the time to seriously negotiate with the prospects you have in front of you. Offers you receive in the future will likely not match what you have before you today until complete a market cycle. With growing inventory, you can expect the volume of tours to decrease as tenants will have more options.
If you haven’t yet listed your space but you are considering leasing or selling your space in the coming months, we have projections as to the expected time on market and a range of values as to what your deal will trade at. If you want to continue to hold your property, but you are considering a refinance of your property, now is the time to act to maximize your loan value and obtain more favorable terms. Be sure to talk to multiple financiers as terms wildly range from bank to bank depending on their credit exposure in other sectors.
If you are looking to buy, my previous warnings of financing tightening are coming true. Think about whether it’s more important to use other people’s money with phenomenal terms or if it’s more important to wait to get a “deal” but have to fork over much more money and perhaps have a balloon payment to boot.
If you are a user looking to lease, Orlando now has a record inventory of sublease products — 1.2 million square feet of Orlando office space is available for sublease — the highest CoStar has tracked since mid-1999. Office vacancy rates are expected to rise and direct asking rents are expected to fall in the months ahead, which are signs of a weakening office market. It’s time to start evaluating your next lease move in a strategic way.
With a shifting market, now is not the time to flippantly sign off on your lease renewal. If you have a commercial real estate office decision to make, evaluate your options carefully with an extensive analysis of the factors impacting your specific situation against the overall forecast especially in your specific geographical submarket and office product type.
Written by Amy Calandrino, Beyond Commercial’s Founding Principal