WHY IS IT A SMART MOVE TO TAKE MORE OFFICE SPACE NOW?
Feb 03, 2010
With office vacancy rates
climbing and rental rates dropping this is a great time for tenants to take
advantage of lowering their office costs and locking in those rates long term.
However, it is an even greater opportunity to lock in future expansion needs now
and without adding office rent costs to their bottom line.
In most major cities in the
United States, the available office spaces today are in larger blocks ranging in
sizes from ten thousand square feet and above. Larger institutional tenants
previously occupied most of these spaces. While a recovery appears to be
underway, institutional office users tend to come in late in a recovery and
leave early when times get tough. Independent firms represent the largest users
of smaller spaces under six thousand square feet on average. These firms tend to
grow first in hard times, particularly as new firms are established from
personnel that have decided to start their own businesses rather than find work
at other firms in this difficult jobs market.
Today, it is absolutely cheaper
to rent space in offices over ten thousand square feet rather than five thousand
square feet. In fact, with the great sublease opportunities today many firms
could pay the same rent for ten thousand square feet as they could at five
Take for instance, my market in
San Francisco. There are some attractive subleases today in the twelve thousand
square foot range that are offering spaces as low as $12.00 per square foot for
Class A office space for a two to four year sublease. If you needed six
thousand square feet of Class A office space you would be paying at lease $26.00
to $30.00 per square foot for similar quality space.
By looking at larger sublease
opportunities you can often grab furnished spaces ready to go. That would allow
you to meet your current office needs and have room to grow without taking the
financial risk of paying more rent for that space. There is a drawback though.
If you have too much extra space your firm could appear to be "swimming" in
it. This could be resolved by offering to sublease space to other firms
which could allow you to defer additional rent costs. Or you can take out some
of the existing workstation areas and give your current employees more room to
work. Either way, the cost savings could be so high that it is worth
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Written by: Hans Hansson
Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 25 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email firstname.lastname@example.org or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.