Rents have sunk to incredible new lows in this upscale commercial enclave just east of I-75. The situation has grown so desperate, in fact, that I just finished up a lease where the owners offered one entire year of free rent to a new tenant. Upfront. Although this was a bit of an anomaly, I see similar things in store for this beleaguered area if things don't improve relatively soon. In the end, we ended up leasing the space to a national non-profit organization and they offered to pay rent for the entire term. To underscore the significance of this, when I stood up and pitched the unit at the Commercial Investment Division's (CID) monthly broker meeting in June, there were audible gasps from other brokers in attendance. What's more, I was fielding at least two calls per week from other agents who wanted it "out of the way." Although I wasn't there, I'm told the existence of this property was of particular note at the last Manate
e EDC vacancy meeting.So this is what happens when you have a perfect storm of a crummy economy, rising commodity prices, overbuilt office space and high pass-through expenses. People shopping for office space in Lakewood are well educated as to the vacancy situation out there and use that knowledge to their advantage. Owners of these vacant properties are hamstrung, at least for now until enough of it gets absorbed that rents can start swinging back in the other direction. There is some very nice Class-A office space available in Lakewood for $11 and $12 per foot currently. Do I think those are fair prices reflective of the product being offered? Not really, but the owners of these buildings have to do what they have to do in these challenging times. Better to have someone paying some rent, plus expenses. than it sitting vacant bleeding money month after month. I do feel that base rents are as close to bottom as they're going to get, but I'm just one guy with an opinion.
The other issue here is that, with such cheap rents, landlords run the added risk of attracting and renting out their spaces to less than credit-worthy tenants. Cheap rent oftentimes attracts the shaky, less than stellar renter. The potential problems these bargain basement tenants introduce could end up being worse than allowing the place to stay vacant a little longer. Tenants who shop solely on price alone are not always the most desirable. Be careful.
How long do I think this situation will last? Probably another year or so before we start seeing some turn around out there. I would advise tenants who are on the fence about leasing space in Lakewood that the big price cuts have probably already been made. I'd also advise them they should get what they can now because the cheap rent ain't gonna last forever.
dex with net increases of $70.5 million and $62.2 million, respectively.
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