Office Market Review

Q3 2021

Trends / Market Forecast

Some landlords offering fitting out incentives

For some buildings, usually those with particularly high vacancy rates (often because their anchor tenant has moved) or older buildings, several landlords are being proactive by offering assistance with fitting out the premises, thus reducing the tenant’s capital expenditure exposure. This is usually in the form of offering packages to cover fitting out costs by amortizing / rentalizing the cost over the term of the lease.

The trend towards hybrid office space solutions (mixture between conventional office space and co-working space) continues. This is especially so for tenants who are not sure about their medium-term space requirements. In these cases, many will choose a building which also has a serviced / co-working space operator in it, so if they run out of space they can easily make up the shortfall within such space.

The trend towards hybrid office space solutions (mixture between conventional office space and co-working space) continues.

Many tenants are expecting super competitive deals in this market but…

Many tenants are expecting super competitive deals in this market because of the Covid-19 effect on the economy, but in general, rates have bottomed out. Many tenants are finding they can renew their leases at the rate they are currently paying and deciding to stay put for a while longer. Those who are downsizing try to do so by carving off surplus space from the current unit, thus saving the hassle / cost of relocating. This has meant there is less movement in the market than before.

Many tenants are finding they can renew their leases at the rate they are currently paying and deciding to stay put for a while longer.

Rates remain static despite patchy demand

Top prime rates still average around $11.00 to $12.50 per sq ft average effective. Mid-range buildings remain unchanged since Q4 2019, at between $8.50 to $10.00 per sq ft, and the economy range is firming slightly, to between $7.00 and $8.00 per sq ft average effective.

To conclude, our market forecast is for rates to remain static over the next 12 months, although some buildings may see a marginal firming of rates, depending on how many leases fall in / expire and vacancy rates over the next year.

Displaced tenants from buildings due for redevelopment will increase demand by 1 Million sq ft