A recent article in the Wall Street Journal reports that office vacancy has reached 15.2% and is expected to continue rising to 19.3% over the next year. The data comes from REIS, Inc a provider of commercial real estate performance and analysis data for over 25 years. Over 25 million square feet were returned to the market in the first quarter of 2009 driving vacancy rates up and rents down. "Effective rents, which include free rent and other landlord
concessions, fell 2% in the first quarter to a national average of
$24.16, the largest drop since the first quarter of 2002, according to REIS. Sublet space, on average, is going for between 10% and 15% less
than what landlords are charging."
It is a great market for tenant looking for space or renewing during the next 12 months. Smart Landlords cutting deals to keep their buildings full during this downturn providing tenants a great opportunity.
Markets such as Houston and Washington DC, with less exposure to financial services, is weathering the downturn better than others like New York City. The vacancy rate in New York increased two percentage points in one quarter, from 8% to 10.2% and rents dropped over 5% to $52.00 per square foot, still over double the national average.
How can you, as a tenant, take advantage of this opportunity? Make sure you get professional assistance. OfficeFinder tenant representative specialists can provide you the answers to your questions and help you find and negotiate (or re-negotiate) a great deal. There is no obligation to contact them and there is usually no cost to you for their services. Request a contact.
Houston Office Space , Lease Negotiations , Manhattan Office Space , Office Relocation , Office Space , Tenant Representation , Washington DC Office Space
According to a recent report by CBRE the amount of empty offices in downtown Chicago took an 8% jump in the first quarter of 2009. The year end 2008 empty office rate for office space in downtown Chicago stood at 12.3%. The 8% jump brings the current office vacancy to 13.3%. They also noted that there was a 40% increase in sublease office space to a total of 3.8 million square feet. Much of the sublease space came from "financial companies, including the collapsed Bear Stearns Cos. and Washington Mutual Inc. JPMorgan Chase & Co. and Bank of America Corp. also resorted to subleases."
As we see unemployment increase we will also see a corresponding increase in the vacancy rate in not only Chicago, but all major markets. The higher the unemployment, the greater the increase in the office vacancy rate in that office space market. This in turn will help turn the office rental rates lower providing better deals for those tenants who are looking for space.
Taking advantage of these opportunities can be tricky, especially if you are considering sublease space. There are risks involved and it is important that you get professional advice. A great source is to use a tenant representative; a licensed real estate professional who specializes in office space leasing and sales. They have a fiduciary responsibility to look after your best interest. Avoid using listing agents. No matter what they tell you, they represent the landlord. Typically a tenant rep will not cost you anything since they share in commissions offered by the landlord. It is a win-win for you. Make sure and level the playing field and have an advocate who know the tricks of the trade. They will make sure you not only get great space at the best price, but also avoid potentially business crippling mistakes.
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Chicago Office Space , Lease Negotiations , Office Relocation , Office Space , Tenant Representation
If you are looking for information on real estate, Alltop has a listing of the all the top real estate blogs. It is a great resource. We are happy to be included, too.
General , Office Space
Despite the recession Regus profits rose 25% according to a recent article at telegraph.co.uk in 2008. Regus, headquartered in the UK, is the largest provider of executive suite space in the world with over 950 location with a total of over 171,000 work stations in 75 countries.
Mark Dixon, the chief executive, said the company's BusinessWorld division, which provides temporary workspace worldwide for business people who work without a permanent office, made more money last month than in the whole of 2008. He said BusinessWorld now has more than 180,000 members across the world.
Mr Dixon said the recession has caused a "fundamental change" in how businesses operate, with even FTSE 100 and Fortune 500 companies using its offices in an attempt to slash operating costs. The company said it has also witnessed a huge increase in demand for a new range of "recession busting" products, including video conference facilities.
He said the recession has been the "catalyst" in irreversibly changing businesses approach to flexible working. However, he added that the company is not "immune" to the global economic downturn and said "2009 will be a difficult year"
Executive Suites , General , Office Space
I ran into a brief discussion on Twitter as to how to sign a lease (they have to be brief with a 140 character limit). Should you use your company name or personal name on the office lease? I found these responses at Business Seek, a small business weblog:
"NO you use your tax ID number EIN. You fill paperwork out in name of corp. and you sign as president. Only need to include personal info if you make personal guarantee."
"Any time you do business you HAVE to treat yourself as an employee, you NEVER personally guarantee anything. this way the company goes under you as the President unless gross negligence on your part like you left with the cash are not liable for the expenses of the company. "
Both good advice, but both pretty naive especially when it comes to small businesses. It is unusual when a landlord does not require a personal guarantee no matter what your business structure unless the term is a month to month and there is enough of a deposit to cover any midnight moves. If you were to never personally guarantee a lease or rental for a small business, there would a very limited choice of alternatives.
Trick of the Trade
What we try to do is place a ceiling on that personal guarantee. An example of this would be to guarantee up to 3 months worth of rental. This would be enough to cover any landlord expenses related to their cost of your acquisition, such as brokerage fees. If there are any significant tenant improvements involved, some sort of amortized guarantee could be created where the amount of the guarantee is reduced over the term of the lease. You'd probably still need to add some period of rent on top of this, but you could also negotiate to amortize reduction in this over the term of the lease. A lease guarantee is a liability that you should show on your personal financial statements. So try to minimize them as much as possible.
General , Lease Negotiations , Office Space , Twitter