January 2023 Newsletter

I. "My landlord offered a great deal to renew our lease at the current rate."

Pause.
Understand that a "great deal" without a strong understanding of your market alternatives leaves money on the table.
A great deal comes when you have the ability to consciously and proactively decide on the option that works best. We are at the point in the office market cycle where there are Landlords who will be more competitive for your tenancy. Whether you choose to relocate or not, having the right benchmark for the market is critical for truly getting a "great deal."

II. “We aren't sure how/when our people are going to come back to the office.”

Short of a major market shift, current office utilization levels are likely going to remain for the foreseeable future. We’re three years into this new paradigm and you should probably not expect any stark changes to your employees WFH, hybrid, or in-office preferences.
In other words, assume the status quo.

III. “We're not using the office as expected and want to explore an exit.”

In today's market, subleasing your space will be the go-to option 90% of the time, although there are three points that you should be aware of if considering this route:

1. 1. You will likely take a significant loss to offload the space
   2. It's equally as important to prioritize the credit-worthiness of a subtenant as much as the rent you will receive
   3. The first offer you receive will often be the strongest

IV. “What is the asking rent for office space at 'X' Building?”

Since the start of the pandemic, the discrepancy between a building's asking rent and the rent a landlord will accept for a new deal has been quite disparate, due in many parts to the industry's notorious lag in pricing to market and price discovery.

The tide may be starting to turn though - beginning in the second half of 2022, we’ve gotten much closer to price discovery in the holdout buildings, as it's become too painful and expensive for the charade to continue.

V. "It must be tough in the office leasing space. How is your business doing?"

While it may seem counterintuitive, times of extreme volatility offer opportunity in our business as a major catalyst for companies to reevaluate their space needs and spend. We were fortunate to complete a company-record number of transactions in 2022. These deals ranged from securing a coworking desk for a 1-person startup, to assisting a 100-person organization secure a long-term lease for their midtown HQ, and many others in between.

Until next month,
Ben

Ben Blumenthal
Principal Broker | Noah & Co.

P.S. - I recently had the opportunity to drop a thought on the office space market in the Washington Post; you can check out the article here.

For the rest of our January 2023 Newsletter, click here.