Commercial real estate sector recovery driven by incentives » RealtyBizNews: Real Estate News

Office rents have more or less recovered from the massive slump at the start of the COVID-19 pandemic.

Businesses these days are willing to pay high rents and sign long-term leases, but that’s not because everyone is suddenly rushing back to work. With the Omicron variant of COVID-19 still a concern, commercial property owners have lured tenants with incentives such as cash gifts and free rent for months.

Office space incentives and deals have never been so commonplace in the city office market, realtors told The Wall Street Journal.

In addition to offering free rental months, office building owners may also offer to cover moving expenses and custom changes to spaces to attract new tenants. But in return, tenants are being charged higher rents. Ensuring office rents stay high is also crucial to instilling confidence in the sector, brokers say.

“For many office landlords, the pandemic poses a deadly threat, requiring them to slash whatever business they need to survive as vacancy rates hit levels not seen in decades,” reports The Wall Street Journal. “Paying money to raise rents is helping to keep construction prices high despite the rise in remote work, meaning landlords can expect to make a profit when they sell a building or take out a mortgage.”

Since the pandemic began, hybrid and remote work have reduced demand for office space. To avoid falling rents, building owners are taking steps to keep their buildings rented. They may be willing to agree longer rent-free periods for this.

For example, Roku Inc. is renting a 240,000-square-foot office near Times Square for more than $90 per square foot. But the company is also getting some incentives, like more than $30 million in construction work and 18 to 24 months of rent-free time, reports The Wall Street Journal.