Office Lull Good News For Tenants

Los Angeles office activity began to slow at the end of 2017. According to research from Savills Studley, leasing activity fell by 18% from the third quarter with 2.7 million square feet of office space leased. Office sales activity through November fell by 17% compared to the first 11 months of 2016. Despite the slow down, asking rental rates continued to inch up by 1.2%. Still, Savills Studley senior managing director Matt Brainard says that the slowdown is creating new opportunities for tenants. We sat down with Brainard for an exclusive interview to talk about how he is advising his tenants and the reason for the move.

GlobeSt.com: What is driving the slowdown in the office market?

Matt Brainard: There are several factors influencing the office market slowdown including the fact that rents and construction costs have steadily risen over the last several years, largely driven by the creative and tech sectors. Additionally, tenants are taking a much more strategic approach to their workplace and the way they are using space. Today’s business environment demands more flexibility, transparency, collaboration and culture. Tenants are typically allocating less space per employee, creating a denser space, and quite often translating into a smaller overall office footprint, which ultimately means less absorption of vacant inventory. As a result, in 2017 we saw a sharp decrease in large lease deals of 100,000 square feet or more.