Experts Tell Office Landlords Not to Drop the Rent
“Landlords are more readily able to convince lenders to participate in the expenditure with TI reserves.”
The office sector’s health is much better than some headlines suggest, according to two prominent members of Colliers office leasing and marketing team.
Well-amentized assets in good locations that offer strong tenant service are primed to thrive, according to Michael Lirtzman, Head of Office Agency Leasing, US, and Matt Musselman, Senior Director, Office Positioning & Marketing, US.
Offering food and beverage and outdoor spaces to highlight a “health and wellness” component is likely to draw greater interest and landlords seek to “earn the commute” and “make people excited about getting back in,” they said.
“If you cannot help tenants give their employees a compelling reason to come back to the office, you will not lease space in this environment,” Lirtzman said.
Musselman said the pandemic’s effect on demand is forcing the industry “to innovate and build a better experience for employees and occupiers. In the long term, this will be a good thing.”
What won’t work is to drop rent, Lirtzman said.
“We have seen that some landlords who have no capital and think cutting rent is the solution have been invariably wrong,” he said. “Cheap rent isn’t going to draw tenancy if the offering isn’t attractive. At the same time, if the offering is high-quality, amenitized, with a robust TI allowance or high-quality turnkey or spec suite, landlords will get the rent they need, and tenants will pay up.”
He said spec suites are ideal for tenants who want to avoid capital expenditure wherever possible.
“Landlords who provide these plug-and-play solutions, particularly targeted at smaller tenants, are seeing most of the absorption.
“We are starting to see that landlords are more readily able to convince lenders to participate in the expenditure with TI reserves, which was not always the case in the past.”