Let’s talk about a very interesting trend that’s going on in the commercial office market that we read about in the article cited above. It shouldn’t be too surprising there’s a trend now toward a movement to shorter term leases. In the past year, there was a lot said and a lot speculated about what might happen to the commercial office as people just started working from home, some employers shut down their offices, and most employers gave employees the choice of where to work. The truth is, however, that the vast majority of companies have kept their leases current, and the commercial office market is strong. Now though, if you’ve been in the market of renewing your lease or acquiring a new lease on a different location, most tenants are now opting for shorter term leases. We actually think this is a hugely positive trend for the long term of commercial real estate.
What happens when you do a shorter term lease? For a shorter commitment, you always pay more. That depends upon the location. A lot of times, if an employer’s got an empty building, he’ll take almost any lease at any price. But in strong markets such as Chicago, Nashville, Atlanta, it’s a much different picture. So why is this positive for commercial real estate owners? In the short run, you’re going to get a higher rate per square foot, and I think this will tend to reset the market. When we get on the other side of COVID-19, when we do get to the new normal, this is going to reset the market at a higher price per square foot for longer term leases too.
In other words, we think it’s a great time to be getting into commercial office investments at the top. If there’s any way we can help you, maybe analyzing a new lease for your organization or analysis of an investment in commercial real estate, let us know! We’re here to help.