by Patrick Hill
Everyone knows Austin is the place to be right now. From “keepin’ it weird,” to the tech-savvy marketplace, we are currently among the most sought-after places in the world to live and work.
Indeed, the influx of people and thriving businesses has caused our economy to boom. In terms of commercial real estate tenants, the boom has led to lower vacancies and subsequent higher rental rates. We are averaging close to $34 per sq. ft. in rental rates across the city, and this number keeps pushing higher. The simple fact is, there are just not as many options out there—buildings are full, and landlords have little incentive to offer lower rates or any other concessions to keep their existing tenants, as they know there are likely a dozen other companies waiting to take the space.
So, what does this mean for users of office space? It means you will need to get aggressive when planning for your next office lease renewal or relocation. How do you, as a tenant of an office building, get aggressive and plan effectively? You engage your commercial real estate broker at least 12-18 months ahead of your lease expiration. Your broker should have contacted you well in advance of this, but if he/she has not, it may be time to make a change. The market may be driven by landlords, and the concessions being offered may be difficult to come by, but inserting a broker into the mix with plenty of time to spare will always ensure that your landlord knows they will have to get competitive to compete for your continued business. The market may be strong, but owners who know you are dealing with a real estate expert will know that you have options (though not as many as before), and therefore you have our greatest tool in fighting those higher rates: leverage.
Leverage is everything in this market. Be strong, be smart, and be ready to be creative. Your real estate broker should make sure you are aware of every possibility out there. There are options out there such as subleasing and coworking spaces that can offer shelter from the booming storm that may be a good fit for your company. In fact, a substantial amount of sublease space has recently hit the market in the past 30-60 days. Subleases can be a great way for your company to ride out this booming market, while oftentimes offering below-market rental rates. If you have a lease expiring within the next 12 to 18 months, NAI Partners is a full-service commercial real estate firm with local knowledge and global reach. Let us know how we can assist your company in navigating through your next office lease renewal, relocation, expansion or sublease.