More importantly for our clients, the rental markets have softened significantly in the vast majority of our markets. The rents have dropped and incentives have increased. The landlords are focusing on tenant retention at almost all costs. Rent trends of three months ago are no longer relevant as transactions over the last three months have been significantly more advantageous for tenants.

Trends Across North America
Nearly every market is feeling the effect of the recession. As usual, the more volatile markets are correcting more quickly. While high prices paid put upward pressure on rental rates, market forces are prevailing. The credit crunch and job losses in 2008 and the 1st quarter 2009 have caused the vacancy rates to increase and rents to decrease. The biggest markets have already had asking rents correct downward by 20% or more from inflated highs. We expect virtually all markets will have increased vacancy rates of 4-8% by mid 2009 and rents will correct by an additional 20% in most markets from January 2009 rates. Many landlords are now willing to do one or two year extensions in anticipation of a better market in 2011.

Opportunities for Tenants
Credit tenants with flexibility to move will find opportunities more abundant. As noted, short-term deals are available, but tenants need to carefully review flexibility versus likely rent hikes in two years. When tenants are able to lock into long-term leases of eight years or more the opportunity increases. This presents a win-win scenario for both tenants and landlords as tenants can cut costs, upgrade space, and gain increased lease flexibility rights, while landlords can stabilize their rent flows. Of course, a corporate tenant should only capitalize on this opportunity with a clear view of the long term, allowing the company to create a strategic real estate plan that aligns with its business plan.

We believe that an advisor who can fight for tenant concessions and flexibility without fear of repercussions from landlords is best positioned to help tenants take advantage of the opportunity.

Note about CresaPartners
With more than 50 North American offices, over 250 affiliated offices worldwide and over $150 M in North American revenue, we are a major force in the representation of corporate space users. We hope you experience the difference when working with CresaPartners. We are the real estate firm that cares enough to listen and give you The Tenant’s Advantage.

For more details on market conditions and how you can maximize your real estate options, contact your local CresaPartners advisor or email expectmore@cresapartners.com.

Bill Goade
Chief Executive Officer
CresaPartners, LLC