It’s an illustration of the lingering fallout for suburban office landlords from a crisis that has given rise to remote work and pushed many companies to rethink their workspace needs, in most cases reducing their footprints. Leasing activity has picked up dramatically this year compared to a mostly frozen 2020, but the cloud of companies cutting back on space continues to hover over anybody trying to land new tenants.
That’s good news, meanwhile, for companies hunting for workspace as they start calling employees back to offices. JLL Senior Vice President and tenant rep Kellen Monti said his clients are seizing the moment by finding bargain sublease deals and commanding more concessions like free rent and cash for office build-outs.
“It’s a highly competitive market, and when one building (gets more aggressive), it leverages another building to have to do it,” Monti said. “It’s just more competitive than it was in 2019.”
Move-outs are still dramatically outpacing move-ins even as effects of the pandemic start to subside. Net absorption, a key demand metric that tracks the change in the amount of leased and occupied space compared with the previous period, fell by 470,000 square feet during the second quarter, according to JLL. That was the second-biggest demand drop-off for a single quarter in four years, the brokerage’s data shows.
Among the biggest new blocks of available space: HSBC, disaster recovery company Q-Tech, industrial automation company Omron and insurance company Protective Life collectively moved out of more than 240,000 square feet in office buildings in the western and northwest suburbs, according to JLL. Some companies, including Costco and Ajinomoto, moved into new spaces in the northwest suburbs during the second quarter, but the departures far outweighed those additions.
The numbers overall aren’t promising for investors predicting that a pandemic-induced surge of millennials moving to the suburbs over the past 16 months will translate…