Occupancy Costs

Availability rates have gone up in most sectors, but rental rates have remained relatively stable over the past 18 months. The average gross rent in the GMA for the third quarter was $28.88 psf which is almost the same as what it was at the beginning of the pandemic. Instead of adjusting the rental rates, landlords’ preference has been to offer more incentives to tenants by offering months of free rents and advantageous tenant improvement allowances.

Generally speaking, class A buildings have fared better during the pandemic. As companies look to reduce their footprint, we are seeing a flight to quality among space users. This means that landlords that possess higher-quality assets are better positioned to perform well over the next few months. Accessibility, air quality, amenities, and other tenant services such as concierge service and distinctive food courts will certainly be attractive options for tenants looking to level up. In the current war for talent, exciting work environments could play a big role in retaining and attracting employees.

In some cases, tenants are choosing to sign shorter term leases. This is an indication that companies are still cautious about making long-term decisions and want to have some flexibility as they navigate the new normal.