I published my first book, The Complete Survival Guide to Negotiating an Office Lease, (Secrets Your Landlord Doesn’t Want You To Know) in 2005.  Back then, trophy Class A commercial office space was the backbone of our economy.  REITS (Real Estate Investment Trusts) backed by Wall Street and Pension Funds backed by corporate giants invested billions of dollars into these properties, which were considered the gold standard for stable long-term investments.  Better than stocks or bonds these real estate assets were consistent money machines backed by hard assets and tenanted by the Fortune 500 and the rest of corporate America.

The model was simple.  A stable corporate Tenant would negotiate a lease with the Landlord to construct an office to suit in return for monthly rent payments.  Leases were traditionally five- or ten-year terms with several renewal options and expansion options for growing tenants.  Landlords were able to create a consistently growing rent roll resulting in a reliably increasing value to the property over time. 

Sure, there were hiccups in the economy over the somewhat recent past such as the inflationary 80’s, the S&L crisis in the 90’s and the recent events of 9/11, but by and large these assets backed by strong corporate tenants remarkably held their value over time, keeping pace with and even outpacing moderate inflation. Things had been cruising along for commercial space for decades. 

Then, in December 2019 along came Covid 19.  Here we are, almost five years later, and we are just now seeing the full extent of the carnage.  With work from home and hybrid work schedules, the trajectory of the long-term leasing model is decidedly downward, and many Landlords with properties in the central business districts are struggling to hang on.  Yes, there are still some bright spots in the suburbs, but the industry is no longer the gold standard for stable investing. 

The key to successfully negotiating a lease in 2024 is to first understand the financial stability of the Landlord.  It is essential to do business with property owners that are committed to the success of their property for the long term; especially by knowing those that have the financial where-with-al to make that happen.  

If you would like to learn more about ways to succeed in the new normal, why not give us a call to find out why, at Dickstein Real Estate Services, “OUR DIFFERENCE IS YOUR ADVANTAGE®”.

Regards,

Lawrence Dickstein