Q1 2023 The Fall Out Accelerates and a Flight-to-Quality Sets In.
The Office Market
For over three years I’ve been telling my clients ‘we still don’t know’ when asked about movements/trends in local, regional and national office markets. They were getting tired of the same answer, and so was I. In Q1 2023 however, fall out is well underway. Rate hikes, non-repayment of debt, vast uncertainty, weak/downward markets, rapid vacancies, highly discounted asset trades all have increased significantly in the last 60 days. Specific to office and what we’ve all been anticipating for over three years is happening quickly.
One aspect of today’s market is that tenants are taking less space, but they are moving into Class B+ and Class A buildings in better locations and with more amenities.
Another dynamic is as pronounced as ever. ‘The market here is a lot different than just over there’, and we could be talking just down the street. What this means to a deal is that rates, deal structure, concessions, postures, competition, suite size, landlord appetites vary widely across the board.
On the subject of Work-from-Home, it’s morphing its way into Year 4, but new company and community cultures are settling in. As we do life differently, how tenants and companies work in this new world is an interesting study to be sure. The term “highly situational” used in my last piece, vague as it may be, really covers it all… size, quality, design, location, amenities and price. WFH policy can depend on culture, leadership’s political leanings, age of the workers, furniture systems and office design.
On the tenant rep side of things knowledge is king: 1.) building-to-building 2.) broker-to-broker 3.) landlord-to-landlord and 4.) local-area to local-area.
Lastly, we recognize how short and brief these emails are, and we hope it’s appreciated.
In our next piece we’ll highlight a few companies’ resolve on the new office – use, design, function and vibe.