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The Slow Recovery and Office Space Leasing

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According to Wells Fargo Economics Group "The Recovery Will Be Agonizingly Slow. So it indeed has been. As this short quote from the Executive Summary of our 2009 Annual Outlook (published in December 2008) neatly summarized, the economic recovery faces a number of secular challenges that will alter the pace and composition of growth. For many decision-makers, the outlook for 2010 suggests continued change and adjustment to an altered reality of more government/less private sector contributions to growth, greater caution/less leverage for consumer spending, greater prudence/less speculation in lending and the importance of exports in moving the U.S. economy."

This related to the glut Office Space for lease means that we have a long wait until the markets start to tighten up, probably in the neighborhood of 2012. Employment is the key to filling office space.  As long as the employment numbers are negative we will continue to see more office space become available. Even when the employment numbers begin to grow, office space for lease will still lag behind while companies fill the spaces they still have under lease, but have not been using, with their new employees.

This is bad news for Landlords, but good news for Tenants. Tenants will be able to call the shots, but will need to be careful. One of the big problems that arises in such a weak market is that of foreclosure by lenders on office properties in which the owners are unable to meet their obligations. Tenants and prospective Tenants need to know what is going on with building financing.  It is not always easy to find out. This is another good reason to work with a tenant representaive who knows your market.

Much attention is generally paid to subordination clauses in on office lease, but that is not enough. A key clause to make sure you are protected and not put out on the street in the event of a foreclosure is a non-disturbance clause. In these turbulent times you may even find that it is not enough to just have this in your lease, but also need to have it agreed upon by the Lender. A good tenant representative in conjunction with a good real estate attorney can make sure you are protected.  Dont' skimp on this. It could be a big problem.

More inforamtion on Tenant Representatives.


Lease Negotiations , Office Rental , Office Space , Office Space Negotiations , Tenant Representation

1 response to “The Slow Recovery and Office Space Leasing”

  1. Joanne C Says:
    There was a big boom in which office space was being bought at high prices as the economy took a downturn more people started to use virtual offices the bigger companies that can afford the space and have employees to fill the space are all of a sudden in a powerful position where a low lease it better than none