call for landlords.
WASHINGTON, DC-It’s a tenant’s market in the DC area. Still. For a period there, it appeared to patiently waiting landlords that the pendulum might be swinging back in their direction. Vacancy stats for the third quarter, along with a steady drumbeat of discouraging macroeconomic and political trends, killed that illusion. In short, leasing volume was down 40% in Q3 year over year, Tom Fulcher, EVP and Co regional manager of Studley, tells GlobeSt.com. “It was the total leasing activity we have seen for the DC area since the peak of the recession. Demand is just now there right now.”
“Q3 solidified the perception for a lot of landlords that it will be a tenant’s market for some time,” Chris Volney, research manager for Studley tells GlobeSt.com. “There is now a willingness on the part of landlords that maybe wasn’t there a year ago to negotiate more with tenants. They are coming to terms with the fact that there are not as many tenants out there.”
One result, Volney says, is that tenants are finding it easier to negotiate lease restructures–that is, extending a lease that may be expiring in 2017, for example, for another ten years, but at current rates. Volney says he has seen a dozen such transactions come across his desk in the District alone in recent months running the gamut from smaller deals to large-sized transactions. Northern Virginia, as well, is particularly active right now.
The most important concession for tenants right now, though, is anything related to flexibility, Fulcher says, such as terminations options or contraction options. “For a tenant, now. Leasing an additional 40,000 square feet of space they don’t need is worse than not getting that extra $5 per square foot on TI,” Fulcher says.