Industry Watchers: Owner Concessions On Rise

This is Part I of a two-part series.

[IMGCAP(1)]NEW YORK CITY-According to the 2008 Studley Effective Rent Index Report, the average national concession package rose for the first time since 2003 and insiders agree that concessions are rising. The report found that the average concession package for 2007 was $60.28 per sf, a 7.4% increase from 2006. The report also found that in 2007, average national tenant effective rents, the estimated cost of occupancy, which includes concessions, also increased from 2006 by 23.4% to $55.20 per sf–a probable peak in light of the current economic climate.

Bradley Kaufman, a partner and leasing specialist in the real estate group at locally based law firm Pryor Cashman LLP, tells GlobeSt.com that he is noticing a rise in owner concessions noting that it is directly affected by leasing slowdowns. Kaufman tells GlobeSt.com that concession packages not only affect newcomers to buildings, but they involve existing tenants as well. “It affects everyone in the marketplace.” The intention of offering packages is clearly to help lure cautious tenants who might otherwise wait to commit to space, he says, but “whether it works or not depends on where the market is headed.”