In a recent study by the National Association of Realtors with it’s members, the results show that small space leases of under 5,000 square feet accounted for 75% of the commercial real estate leases completed in the 4th quarter of 2013 and that leases under 2,500 square feet were at 43% of the total. They also found that lease terms were in the typical 3 to 5 year range.
As the market improves, landlords are finding it less necessary to provide rental concessions and the report identified that they declined by 4% on a quarterly basis.
What does this mean for the office market? Very simply that the small space office leasing is the driving the market. Many of the larger users of office space still have excess leased space that they are still working to fill, AKA Shadow space, after the recession. It is also the reasons that the vacancy rate is not declining at faster rates. It takes a lot of small tenants to fill up empty space.
By: James Osgood