In most years, the final quarter ushers in some excitement as the Manhattan commercial real estate market anticipates a rush of activity during the closing quarter. Heading into this fall, though, some landlords appear to be placing a vote of no confidence in the outlook for leasing activity in Class A properties. In addition to prodding demand, more owners are doing their best to preserve the status quo and being aggressive to keep tenants already in place in their buildings.
A few quarters ago concessions were being dangled almost exclusively as the lure to drive leasing. Now, however, landlords are beginning to budge on asking rents. This marks a big change in the lengths Manhattan landlords are going to to keep important tenants within their portfolio.
Tenant retention has always been critical to landlords, but it has become increasingly paramount of late as they appreciate that the cost of replacing a tenant is rising in this market. Landlords with run-of-the-mill space face the risk of an extended marketing period. In turn, more landlords are reluctantly willing to consider shorter-term leases. More owners are plugging any holes in their roster, accepting that “a bird in hand” is better in light of the likelihood that demand will remain tepid for the foreseeable future.
Here are some additional measures Manhattan landlords are commonly taking in order to keep their tenant rosters intact:
- Lease term flexibility
- Raising concessions, even on renewals and shorter term deals
- Increasing the value of turnkey/build-out packages.
- Restacking space in a property to accommodate contraction/expansion
- Providing swing space while they build out a renewing tenant’s space
Given the complexity of lease structures, these are just a few of the concessions being implemented by landlords. With market conditions favoring tenants, particularly in Midtown’s Class A sector, and uncertainty rising in the wake of a transformative election, savvy landlords with upcoming vacancies are going to greater lengths to put their houses in order. If you are in position to negotiate your lease, make sure your company is reaping some of these benefits.