One of my favorite clients used to say, “If I could lease one desk at a time for one day at a time, that would be ideal.” Of course, he was taking flexibility to an extreme, but as needs and markets change, it’s a topic that seems to come up often. Flexibility used to mean a termination or contraction option in a lease. However, times have changed because of the options available.
As certain submarkets in New Jersey tighten, as well as those around the country, flexibility is becoming harder to negotiate into office deals. Since the downturn in late-2008, termination options have been standard for many corporate tenants. However, lenders treat those leases as short-term and the presence of the option impacts the level of financing the landlords are able to achieve.
Lately, I have seen certain owners take a firm stance on termination and contraction options in well-leased buildings. While they are not often exercised, some tenants insist upon having a termination option in the lease, even at a steep cost. Recently, one of my clients leased space at their second choice building, because the first choice landlord held firm on this issue.
There’s one key factor that I think that favors small tenants in this regard, and that’s non-traditional solutions. As the workforce, specifically those in sales, become more agile and able to work remotely, the reliance on a desk with a phone and a computer will continue to diminish.
The options for those who want “touch-down” space have increased exponentially in the last few years.
Many office suite operators offer the ability to buy a certain number of hours a month rather than lease dedicated space. In this scenario, the client I mentioned previously would have gotten his wish.
LiquidSpace, a company that matches those with excess space with those that need space on a daily or hourly basis, released news this week that the supply of hotel workspaces in their inventory has increased by 1060% in the past year and now makes up almost one-third of the available space nationwide in their inventory. Hotels aren’t just marketing unused meeting/conferencing space, but they are also converting other parts of their properties to revenue generating areas by catering to the mobile worker.
Finally, in yet another attempt to cater to the millennial entrepreneurs and workforce, co-working space is one of the hottest trends in urban environments. While we haven’t seen a tremendous influx yet in New Jersey, WeWork, one of the leading co-working providers, has 11 locations in New York City, along with locations in six other US markets, London and Israel. Clearly, there’s a demand for this type of environment.
As landlords come to realize that they are not only competing with other office buildings, but also other non-traditional solutions, they will have to get aggressive and creative to win and maintain tenancy, almost irrespective of market conditions, when it comes to smaller spaces. There are simply more options for tenants to choose from.
By: Jeremy Neuer
Senior Vice President | CBRE
Jeremy Neuer is a Senior Vice President with CBRE in the East Brunswick, NJ office. He specializes in office leasing throughout New Jersey and also represents several large corporations on a national basis.
Email Jeremy: firstname.lastname@example.org
Follow Jeremy on Twitter: @JNeuer19
Follow CBRE NJ on Twitter: @CBRENewJersey
Read more of Jeremy's blog posts on NeuerSpace
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