Readers of this newsletter understand how hard we have worked over the years to keep you, our customers, on the cutting edge. We want our readers to understand the complex issues that face New Jersey office tenants in easy-to-understand tidbits. While we don’t have a crystal ball, we do listen very carefully, and we know how to read the tea leaves.

In 2021 our customers want to successfully navigate long term leasing decisions in a rather turbulent short term business climate. Predictions for 2022 have not been easy, however, in this edition we are going to try to do just that.

What do we know so far? After more than 18 months of not being in the office, there has not been much downside impact. While there are small and even medium-sized companies that have decided they not longer need to work out of an office, the large companies for the most part have not made any dramatic decisions.

We all expected that September would be the month when the employees at the large companies would gradually start to return to work so that by year end everyone would, for the most part, be back in the office, albeit with some minor changes and seating revisions. Then came the Delta Variant causing some large companies to back up the return to Year end. With the Delta waning, that may prove a good call.

Last month, however, the Federal Government decided that all companies with 100 or more employees must now require vaccine compliance or institute a monthly Covid testing protocol. This further complicates the return to the office and stimies Vaccine protocols that companies may have adopted in favor of a Government mandated top-down approach.

So, what are the long-term implications of all this on Landlords and Commercial Office Properties? Surprisingly, there is still a rather tight office market out there and rents have yet to be significantly impacted. What we do see is that Landlords are very anxious right now, and highly motivated to keep tenants and fill vacancies, but there is no fire sale. Many tenants seem reluctant to sign long term leases in favor of more flexible short term lease extensions.

Our prediction is that as leases continue to roll, there will be a gradual erosion of property cash flow as short-term lease renewals begin to take their toll on the appraised value of real estate assets. With many companies reluctant to sign long term lease renewals, and as others continue to evaluate the impact of work from home, flexible working days, and other issues, the long impacts may not yet be visible.

The good news is that for stable tenants, and yes there are still a good number of them, this may be a good time to make a long-term deal.

To find out how this story end, see you next month.

Regards,

Lawrence Dickstein