While the perception is that
office space leasing is dominated by the large 50,000 + square foot deals that
make the news, the reality is that it is the small businesses leasing the 2000
square foot space and less that is driving this market. Those large deals that
get all the splash represent less than 1% of the current market according to
Co-Star. Below are highlights from a
recent article by Randy Drummer of Co-Star.
“The rebound in office-using jobs is spreading to
smaller businesses, which dominated office leasing activity during the first
quarter of 2012. The continued positive absorption, coupled with dwindling
supply of available space, is setting the stage for resumed rent growth in U.S.
markets over the next few years, CoStar Group reported this week in its
First-Quarter 2012 Office Review & Outlook.
While overall job growth has been less than expected,
the economy is converting the number of temporary jobs to permanent fulltime
jobs at a faster clip and employees are working a greater number of hours on
average, trends that bode well for office demand and rent growth over the next
three years, the CoStar economists reported. If job forecasts hold up, the
unemployment rate will fall to its long term of average of below 6% by 2015.
Leasing is now dominated by smaller tenants, with over
50% of transactions involving blocks of space measuring 2,000 square feet or
less in 2011. At the same time, large tenants are very rare in the market, with
transactions over 50,000 square feet representing less than 1% of total
activity, according to new data generated by PPR and CoStar.
Tenants are also becoming more efficient in their real
estate usage, with footprints on new leases down 6% over the last 10 years.
While Class A tenants have seen a modest 3% increase in square footage, the
amount of Class B space taken is down by 5% and Class C space down 13%.”
