Shorter Leases, Smaller Footprints

Joseph Gordon with Bisnow wrote on November 8, 2022 that according to a number of sources, new office leases showed 18% fewer deals as compared to Q3 2021, and 15% less than Q3 2019. The average size of the deal also went down 16% in 2022 as compared to 2019. Leases are also getting shorter with the average term now 6.2 years. “Office downsizing is a common cost-saving measure as the economy worsens.” It also might make sense if most of the workforce is only coming in a few days a week if at all. One big factor at odds with shorter lease terms is the skyrocketing cost of tenant improvements, as the shorter the lease the less the period to amortize these costs so the landlord gets some type of return from their initial expense.