Over the last few years, the commercial property market in the U.S. has struggled under the weight of businesses downsizing and reorgnising.
Jobs being exported to China and India has also taken its toll, and seen mass emmigration of U.S. jobs overseas. This was all in motion before the current recession appeared in full force. So what was an unnerving trend in the U.S. is now becoming a reality: there is a large imbalance in the market - too much space for too few customers.
By the end of the first quarter of 2009, U.S. office space vacancy had climbed to 15%.
A Tennants Market
Moreover, since commercial real estate tends to be a lagging indicator, even if the economy starts to grow again later this year–something of a tall assumption–office landlords might not feel the benefit for quite a while longer than that. Now we have a ‘tennants market’, where financially sound tennants are in a great position to negotiate rental values, as there is so much office space to choose from. Rents are also down 3% from last year, and landlords are having to compete fiercely on rents.
In previous years, landlords would always check if the tennants credentials were good, and were financially reliable. That still holds, but now there’s another consideration: is the landlord financially secure? In the current climate, tennants need to make sure if they commit to move into new office space, that the landlord is reliable too. Landlords had intially resisted lower rents as this affects the valuation of the property, but the tide could only be resisted for so long. Rents for commercial property are now at the lowest point in the last 5 years.
The good news? If your looking to lease or buy Commercial Property, there has never been a better time to be looking.
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