A changing market and climbing vacancy rates have given tenants the upper hand.
Offering tenants smart, aggressively priced deals can still result in a win–win for all parties.
A few months back, the Ottawa Business Journal reported on the changing landscape of the Ottawa economy. “With its legions of bureaucrats in what used to be thought of as ‘jobs for life,’ Ottawa’s economy was once considered to be a recession-proof bastion of stability in a boom-and-bust world. Today, that ground is a lot shakier.”
For landlords, we know all too well that the “shakier ground” is exactly what our buildings are standing on.
Consolidation in the private and public sectors combined with federal job cuts are emptying space across the region, mostly in Class B buildings and older structures that are often in need of retrofitting.
The so-called Millennials are helping to change the commercial rental landscape, too. Rather than expecting to work in traditional enclosed offices and large meeting rooms, this younger generation of workers seems content with smaller, unassigned workstations—help yourself to whatever free desk is available when you arrive in the morning—and using breakout areas when collaborating. This more efficient floor plate helps tenants cut real estate costs—some say at the risk of productivity. (Critics argue that workers are more easily distracted in this environment and, therefore, less productive.)
Tenants clearly have the upper hand in this scenario.
If you are a landlord, what are you going to do?
Well, you could always try to re-lease the space as it is. Admittedly, this is not a very attractive option for most. If history is any indicator, it could take up to four years to recover after federal-government downsizing.
Or you could renovate. While that takes a lot of down time, not to mention a lot of money, turning a Class B space into a multi-use facility could be a way to differentiate your space and attract new occupants.
Considering turning some of those buildings into condos? Given the well-publicized glut of condominium units already available in the core—many of which aren’t even occupied yet—adding more may not be the answer.
Most analysts agree that, for the moment, vacancy rates will continue to climb, as will the downward pressure on lease rates. It will be a trying time for all landlords, of that there is no doubt.
At Inside Edge, our focus will remain razor-sharp as we continue to do what we do best. And that starts with listening to our tenants—both current and potential. By putting ourselves in their shoes and understanding their needs, we can put together attractive offers while continuing to provide great value to owners in the form of unparalleled service and competitive rates.
It’s what we are known for and it’s what will continue to set us apart—as it has for 25 years—regardless of the inevitable ups and downs of the local economy.