"Stay versus go" decisions have tilted decisively toward the latter: 74% of large lease transactions this year involved relocations or new leases. Those moves often trigger major buildouts, adding yet more pressure to the TIA equation. Still, Savills cautions that if economic conditions worsen, occupiers may swing back toward renewals and less capital-intensive projects.

Debt Stress Deepens

Behind the scenes, financial strain in the office sector continues to build. The volume of distressed office CMBS debt has reached its highest point since 2012. Trepp reports nearly $85 billion in loans now categorized as watchlist, special servicing or delinquent. The office delinquency rate hit 11.7% in August, the highest in Trepp's 25-year history—up nearly 370 basis points from a year earlier. Urban offices make up about two-thirds of that distress, a troubling sign for landlords whose access to capital is tightening just as tenants demand more.

Longer Leases for Bigger Buildouts

The link between TIAs and lease term lengths has also strengthened considerably. From 2016 to 2020, Savills found the correlation between the two at 0.55; between 2021 and 2025, that figure climbed to 0.76. The message is clear: the larger the allowance, the longer the commitment. In quarters with the richest incentives—such as early and mid-2025—lease terms tended to stretch longer, underscoring a renewed focus on stability and asset quality over short-term flexibility.

A Market in Two Speeds

Savills and CompStak conclude that the office sector is now operating in two distinct gears. Well-capitalized landlords with prime, well-located buildings can sustain strong incentives, buoyed by leasing momentum at the top of the market. Owners under debt pressure or holding older assets, however, face tougher choices.

Instant Insights /

Tenant Buildout Costs Outpace Allowances as Material Prices Climb

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