FROM THE OFFICE MARKET EXPERTS
Our Office Services Group at Colliers | Columbus specializes in the leasing and sale of office space across Central Ohio. Owners, investors and tenants trust our office brokerage team for their in-depth market knowledge and reliable advice to develop tailored solutions for their real estate needs. With a dedicated focus on the office market, they possess extensive expertise in tenant behavior and current industry trends. As tenant demand shifts toward smaller, well-designed office spaces, where should owners prioritize investment to make their buildings more competitive? Building owners are investing in common area features that allow tenants to take advantage of what the building offers instead of building those amenities within their own space. Examples include classrooms or conference rooms that accommodate 20 or more people in the common areas, as well as soft seating and informal meeting or gathering areas that make the building more attractive to tenants. - Chris Potts, Senior Vice President Are you seeing a moderation in the “flight-to-quality” trend among office tenants? Why or why not? I don’t see a pullback from the flight-to-quality, but tenants have become more disciplined and selective. Well-located, amenity-rich Class A properties continue to command a meaningful rent premium and outperform the broader market, underscoring sustained demand for quality. At the same time, today’s flight-to-quality is less prestige-driven, allowing thoughtfully renovated Class B properties to compete when they offer compelling value. - A.J. Norman, First Vice President What viable paths do you see for large, single-tenant suburban offices with limited operating income to fund tenant improvements or speculative suites? There are options for owners to fund TI and spec suites, but none are particularly attractive, especially if the owner is short on cash. They are unlikely to move forward with these projects without available capital. One option is to initiate a cash call with their investors to raise funds, which is usually not well received. Another option is to approach their bank or another lender for a construction loan, which may not be approved or, if approved, could come with high interest rates and potentially require the owner to post another asset as collateral. The most common way owners structure deals when TI is needed and cash is limited is by offering free rent in lieu of a tenant improvement allowance. For example, if the cost of the work is equivalent to six months of free rent, the landlord may ask the tenant to pay for the buildout upfront in exchange for that free rent. However, this is not a perfect solution, as tenants typically do not have or prefer not to spend that level of cash on an office buildout. - Marty Ellinger, Senior Associate How are you partnering with property management teams to deliver more customized outcomes for your clients and landlords? Ensuring clear communication with brokers and property managers is essential to delivering building services efficiently. At the same time, anticipating the needs of a modern property helps keep it in excellent condition while remaining cost-effective. - Chris Potts, Senior Vice President