News & Research Archive

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 thousand.

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 it.

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Written by: Hans Hansson

E-mail: hans@starboardnet.com


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 hans@starboardnet.com or call him at (415) 765-6897. You may also check out his website, http://www.commercialspacefinder.com/.

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