5 Big Commercial Real Estate Leasing Trends to Watch in 2021 – Commercial Observer

A handful of trends in commercial real estate leasing will dominate the new year and are well worth seeing. The pandemic has lifted each of them in some way, but 2021 will bring new twists and turns even if COVID (hopefully) recedes.

Coworking is not dead. It seemed so We workThe catastrophic IPO in late 2019 and the pandemic in 2020 had hard stopped the rise of coworking / flex space. The trend is far from over, regardless of the sometimes drastic setbacks in leasing by coworking operators. Indeed, a recent study by Colliers International predicts that the number of coworking and flexible work spaces across the country will double or even triple within the next five years. A big part of the reason is the demand for flexibility carried by the pandemic. Enough tenants simply don’t want longer leases, a reality that even older landlords recognize.

Shorter leases remain in place at least for a short time. Also put this under Flexibility. In particular, more and more office tenants are looking for shorter leases than in the past, and more and more landlords are reacting to retaining and attracting tenants when commercial buildings are largely vacant on most working days. So expect to see fewer 10- and 15-year leases signed in 2021, and more leases with three and six-year terms instead. Many of them will also be renewals and not new leases. For example, throughout 2019, more than 70 percent of leases in Manhattan were new or expansion contracts rather than renewals. From April to September of this year, this proportion fell to below 60 percent.

The dream of subletting will continue to increase. Any market analysis over the past six months will show you that the amount of office space available for sublet has increased dramatically. In Manhattan, for example, it’s at a level that hasn’t been seen since the dot-com bust at the turn of the century. and in LA the total is likely to be at an all-time high. Some of these are companies that temporarily reduce the space required. Some of these are companies re-evaluating how much office space they really need in a post-COVID world. And some of these are just entities testing the water and seeing what they can get for their footage. Whatever the reason, the increase in sublet space is putting office rents under pressure.

Restaurants like this one in LA are trying to rely on takeaway and / or delivery to stay in business during COVID. Photo: Robyn Beck / AFP via Getty Images

Creative retail and restaurant rentals are a new normal. The pandemic has hit retailers and restaurants. Trends that existed before COVID, like the titans’ shift to e-commerce, have only accelerated. and stay-at-home advice and mandatory non-essential store closings have cost restaurants and stores valuable sales time (and landlords a lot of rent). The new reality that has lasted for months has led landlords and tenants to get more creative with leases in order to stem the flood of vacancies and bankruptcies. Trends such as restaurants and retailers paying their rent based on only a percentage of their gross sales or sales have become more common – and will continue until something like normal returns.

Warehouse leasing will stay hot. If there is one undisputed winner of commercial real estate during this terrible pandemic, it is warehouse / industrial space. The rise in e-commerce has already given the sector a boost, particularly near larger population centers. People like Amazon need last mile and other delivery points to work successfully. However, the demand for such storage space has increased during the COVID as more consumers go online for the majority of their purchases. Case in point: Amazon opened 100 warehouses across the country in September alone in preparation for a Christmas shopping season that is turning out to be a turning point in the stationary versus e-commerce debate (spoiler: it’s about e-commerce).