Takeaways from tenants returning to the office
In the last 30 days, we’ve had countless conversations with our clients and other NYC tenants about how exactly they should think about their space needs as they plan to return to the office in 2022.
We’ve realized two important takeaways from these conversations that are worth sharing with you:
Takeaway 1: if you’re looking for new space, start with subleases. Your strategy and approach should change depending on the type of sublease space you want.
Decision makers are very focused on subleases — and we couldn’t agree more. This is the first place we recommend looking (in most cases); they’re steeply discounted, they’re ready to go and with 20 million sf of sublease space on the market, chances are good the “right one” exists. But how do you actually get the right one? If you’re looking for a beautifully built, top tier space from a Fortune 500 company with a long term — get in line. There’s a “flight to quality” driving intense competition for these subleases. It doesn’t mean you can’t negotiate, it just means you may not get the same “steep” discount you’d expect in a pandemic market (and they’re still 20%+ less expensive than direct space).
On the flip side, top-tier space is only a percentage of the available sublease space — in many cases, the rest of the subleases on the market are still yours to steal. Companies want out and every day without a subtenant means they are continuing to pay rent for space they don’t need or want; they want to give you a deal, especially when the remaining term is short and shrinking by the day.
Takeaway 2: if you’re looking to get out of your lease, start by submitting the right proposal. Your strategy and approach should change depending on the outcome you want and understanding what may incentivize your landlord.
There are many tenants still trying to get out of their existing leases. If this is you, you’re not alone and here’s what I know from successfully negotiating hundreds of these: the key is communicating the right proposal. The “right proposal” means one that is both feasible for you and gives the landlord something in return (i.e. a lump sum payment that’s a fraction of your remaining lease obligation). Trust us, landlords want to avoid the time and hassle of the courts as much as you do.
With those two takeaways in mind, the message is clear: this is still a tenant’s market. Whether you’re focused on taking new space or getting out of old space (or both), the key to taking advantage of it is knowing what the right strategy should be. No two scenarios are the same, but our job is to listen to your specific scenario, share what we’ve seen and successfully negotiated, and recommend the right strategy to solve your problem.