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Office Landlords Pull Back Slightly on Concessions

NEW YORK CITY-With the market stabilizing, building owners may be taking a stronger position than last year, says tenant-rep firm CresaPartners.

By Paul Bubny | Updated on February 16, 2010

NEW YORK CITY-Thanks in large measure to a drop in rents and a rise in vacancy, office tenants found the market to be largely in their favor in 2009. This year promises more of the same, only with a little more effort on the part of tenants, says CresaPartners in a fourth-quarter report. “The recent leasing activity will give landlords confidence, and tenants will need to negotiate hard to get concessions similar to those we saw this year,” the tenant-rep firm says in its report.

“Different landlords are going to take a stronger position than they did last year,” Robert Stella, EVP and principal at CresaPartners, tells GlobeSt.com. “But nobody in New York rolls over and plays dead in terms of giving things away. You always have to fight for it.” That said, Stella says that in contrast to the downturn of the early 1990s, in which building owners took about two years to respond competitively to a declining market, “landlords reacted very quickly” this time around.

Whether landlords will be quite as willing this year to provide rent concessions and stronger work allowances is very much on “a case-by-case basis depending on the building and the landlord,” Stella says. “If a building has 10% vacancy as opposed to 30% or 40%, that landlord may not have to be as aggressive as someone who has a major vacancy. But they’re not going to be silly and lose a good tenant. Compared to what tenants were getting 18 months ago, it’s still going to be very sweet for them.”

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