Tired of hearing about the new normal?  Most business owners today are finding that there is nothing normal about today’s commercial office space market.  In fact, many of my customers are finding it very difficult for them to navigate. 

        Office tenants for many decades have looked to the Landlord to design and build their office space to the specifications agreed upon in a lease.  Traditionally, the design build process would take around 6-8 months to complete, after which the tenant would occupy the space.  The cost of the project would vary depending upon the scope of the work, ranging from just carpet and paint and moving a few partitions to a full-blown reconstruction of the space.  A typical lease term was five years to amortize the cost of the construction in a turnkey (no cash out of pocket) transaction.  Total construction costs for an all-private office layout a decade ago here in New Jersey would range from $25 to $35 per square foot, or around $5 to $7 per square foot per year in a five-year lease.

        Today, however, we find that the cost of constructing a turnkey layout for full buildout is around $80 per square foot or higher.  Because of the steep rise in the cost of constructing new space, we find that in order for Landlords to fully amortize the cost of these improvements, the typical lease term for a turnkey project is now ten years or longer. 

        Business owners who made it through the Pandemic are still trying to convince folks to come back to the office full-time, albeit many have settled for a permanent hybrid schedule.  

When faced with renewing the lease or relocating the office in the new normal we are describing here, many seem to be balking at the prospect of locking in for such a long-term commitment.  Who can predict with any kind of certainty what a company’s space needs will be for the next ten years.

This is where a tenant advisor, with decades of experience structuring leases with flexible leasing terms, can make a difference.  Knowing how to approach the Landlord with a range of options that work for both Landlord and Tenant is essential to making long-term commitments in a short-term economy.

So, how are you navigating the new normal?  If you are trying to figure things out, why not give us a call to find out why, at Dickstein Real Estate Services, “OUR DIFFERENCE IS YOUR ADVANTAGE®”.

Regards,

Lawrence Dickstein