A recent jobs report out of Washington made note of the increasing number of temporary and contract workers that staffing firms are using to fill vacancies in companies throughout the country. In fact, it’s predicted that contract workers could makeup a quarter of the American workforce within only a few years. If this trend picks up in 2010, commercial landlords may start to see tenants downsize, increase demand for smaller office floorplans and even start to seek shorter lease terms to accommodate fluctuating staff needs.
Important for tenants considering taking advantage of this employment trend, which can have a number of business benefits, is how it will impact the concessions a landlord can provide. Current market conditions are more favorable to commercial tenants than they’ve been in nearly 20 years. But landlords cannot afford to offer the types of concession packages on a short-term lease commitments that are common to long term leases, especially when the landlord risks the space may soon be back on the market after the short-term lease. It simply doesn't make financial sense for them.
When a landlord offers abated rent, a generous improvement and relocation allowances or other types of concessions common today, they amortize those costs over the life of the lease. An 18-month lease, for example, will not afford a landlord to offer space in much beyond an "as-is" condition. This is important to understand, as many business managers or owners that I speak with in my day-to-day business with Carmen Commercial Real Estate Services often don’t seem to recognize the difference in value a short-term vs. long-term lease provides to a landlord and thus, they often expect landlord concessions for their 3 year lease that are found in a longer-term lease.
Thus, if a short term lease or other flexibility options are your goal, then understand that your effective rent may be higher and build-out allowance a bit less than what your neighbor, who recently negotiated a five-year lease for space in the same or a comparable building, is paying.
The trend in business to hire contract workers is allowing businesses to reduce overhead, reduce the amount of space leased, and hire specialized employees on a per project basis. It is critical, however, that when seeking space for your temporary employees or contractors that you remain realistic and flexible on your space needs. Serious rent reductions, improvement allowances, green fit-ups and other benefits that have become common will not be as readily granted to a short-term tenant.
That being said, space today remains considerably less expensive than it was a few years ago, so there are still many opportunities to secure quality space and historically low cost. If you're planning on adding contractors or employees in the upcoming future, my firm would be glad to give you some ideas of what is available in the market. Provide us with a snapshot of your data at our Criteria Questionaire, and we'll provide you with a survey of availalbe properties.
Posts
1 comments: