The events of 2020 have changed how corporate tenants approach their business plans. In 2021, tenants are making plans that match long-term goals with short-term results, especially for businesses that have been greatly affected by the pandemic. Regardless of the approach that corporate tenants go about matching their tenancy with their business goals, the most important thing is to be prepared. In this article, we are going to explore the important CRE tips for corporate tenants in the second half of 2021.
- Don’t Default into a Renewal
In 2021, corporate tenants have strong negotiating leverage. Many businesses default to renewal because it is convenient, without even considering the alternatives. As a corporate tenant, now is the best time to start considering your options. For instance, you can pick up a high-quality long- or short-term sublease below your current rate during this pandemic.
- Work with a Professional That Can Interpret all the Data
It is easy to want to go at it alone. However, there are an enormous amount of data available to corporate tenants as they look for the perfect office space opportunity. To accurately interpret this data, tenants need professionals. Work with a tenant rep broker who has access to the most advanced analytical tools and information. With the right data and professionals, you can access the best locations in your target area
- Consider a More Efficient Footprint and Focus on Flexibility
Another tip to consider is to downsize your space needs. This is particularly useful to those in retail as seen in Starbucks and Dutch Bros. recently. To do this, you have to evaluate where sales are coming from as well as areas where traffic is insignificant. For example, non-drive locations may be closed.
In today’s market, it may be more effective to go for shorter-term leases and increasing flexibility wherever you can. Having a shorter-term lease obligation will allow you to take advantage of the dynamic nature of the market. In case you decide to go for a longer-term lease, ensure to work in strong termination option(s) and expansion rights (ROFR/ROFO). These two provisions provide more flexibility.
- Location Matters
In commercial real estate, location matters, and rates are not the same. A great office deal in one city does not necessarily mean the rate will be the same in another city. Also, since several cities are affected differently by the pandemic, some markets are faring better than others. The remote work trend is becoming more prevalent in emerging technology industries and creating larger vacancies in more expensive markets like San Francisco or Los Angeles. This is leading to a huge drop in rent and occupancy is usually expensive areas.
- Evaluate Your Culture Alignment
It is essential to check if your current space still supports your workplace culture. For instance, your office layout can affect how work is done, employee engagement as well as the culture to be lived out among your team. Hence, it is important to determine how your employees work and connect best and improve the office layout to maximize productivity and employee engagement.