Businesses hunting a new office location might be in for some bargains.
Real estate execs are expecting a decline in office rents and more giveaways by landlords thanks to the COVID-19 pandemic.
More than half of property company professionals recently surveyed by commercial firms Transwestern and Devencore said they expect lower office rents during the rest of 2020. Only 2% thought office rents would rise.
And 77% of execs polled said they expect more lease concessions as landlords try to lure tenants to buildings.
“Traditional office space is expected to lag as occupiers pause leasing decisions until the pandemic is under control,” Elizabeth Norton, senior managing director of research services at Transwestern, said in the report. “Work-from-home strategies could offer cost-saving alternatives to select tenants, increasing the possibility of space reduction.”
Transwestern and Devencore quizzed property brokers in 43 North American markets for their midyear industry report. The study confirms that nationwide office leasing and construction slowed as the COVID-19 pandemic took hold in the U.S. Almost half of the industry leaders surveyed said they expect office building tenants to “pause lease decisions for the foreseeable future, instead opting for shorter-term renewals.”
Net nationwide office leasing dropped by more than 14 million square feet during the second quarter — the biggest such decline since the Great Recession.
And net office leasing in the Dallas-Fort Worth area in the first half of the year fell by more than 2 million square feet because of COVID-19 and the resulting job losses and recession.
Asking rents for D-FW office space were basically flat in June compared with a year earlier.
While the office sector has had setbacks, the industrial building market nationwide has continued to grow.
Almost half of real estate executives around the country said they expect warehouse leasing to rise because of e-commerce and grocery delivery demand.
“New inventory coupled with increasing sublease space pushed the industrial vacancy rate slightly higher in the second quarter, to 5.4%,” said Matt Dolly, director of research at Transwestern. “However, the industrial property sector will continue to flourish as much of its tenant base is essential businesses.”