The Office Market Isn`t Dead. It`s Just Resting

Next year is going to be a confusing one for anyone in the office market. The coronavirus pandemic emptied out most offices throughout much of the past year, and everyone from entry-level workers to CEOs found Zoom calls and other technologies made it possible to work from home. But the possibility of vaccinations and increased safety won’t end uncertainty and leaves both landlords and tenants with a dilemma: How do you negotiate leases when it’s impossible to know how many employees will return to the office, how many will stay home and how much space will be needed?

New leases for significant amounts of space were rare throughout summer and fall as most tenants took a wait-and-see attitude. Q3 activity in Chicago was mostly confined to sublease deals and renewals, according to a Colliers International report. Year-to-date absorption was negative 146K SF, and about 2M SF became available for sublease. The average rental rate was essentially unchanged in the past year, standing at $42.13 per SF in Q3, just 2 cents below where it was in Q3 2019.

But behind the scenes, some negotiations are taking place, and big changes could be afoot...
   ...more

RSK: Let`s hope so. I see rents dropping and more flexible lease terms including low rent if another pandemic hits the US.

Ken Notes: I think the real estate market should lobby to get some legislation in place to pay the interest on loans and defer payments for both the owners and the leaseholders in times of government shutdowns. The foreclosure / bankruptcy cycle is helping no one except those with cash to buy up the collateral damage...