You need to compete with sub-leases. Here is how.
As a landlord, small spaces (under 10K sq ft) comprise a large percentage of your total office portfolio. In the past, you've been able to lease these spaces without needing to provide design support or negotiating on terms or TI. COVID is making it hard to lease these suites, because so many existing tenants are coming to market with subleases as they shed unneeded space. With flexible terms, pre-designed spaces, and accurate costs, these subleases represent a serious threat. To win deals, you need to compete with these subleases, but more importantly, you need to find a cost effective way of doing so. FastOffice is that solution.
COVID-19 has and will continue to cause a surplus of space to come onto the market. C&W's global report projects that the US will see vacancy rise to 17% and rents to drop by 9% by 2022. But this vacancy won't affect all your spaces equally. Large, stable tenants won't cut space in the short-term. It'll be your smaller tenants who can't weather the downturn, or decide that most of their team can work remotely for the time being. This is creating the perfect storm.
In recent years, we've been living in a landlord's market. Low vacancy, and rising rents meant that you've held the power in negotiations. This meant three things for prospects who were looking to lease small spaces:
Design - Prospects wouldn't get professional support in making their decisions. The margins of profit and commission on smaller spaces wasn't enough to justify the costs of engaging designers. Prospects were left guessing whether the office could fit their needs.
Terms - Prospects had to lease on 5-year terms. This hurt small companies which had less predictable growth plans and predictable needs. This left many with either too much or too little space with years left on their leases.
Costs - Estimating the all-in cost to lease was also left to prospects. Back of the napkin calculations were the best that a smaller tenant could get.
But now a large number of sub-leases are coming onto the market. Sub-leases often have three unique attributes that make them more attractive to prospects:
Design - These spaces are already furnished and designed. Prospects won't need to hire a designer to model the space; it's already done.
Terms - These spaces can be leased on flexible terms. If the prospect only wants to stay for a year, they can negotiate that.
Costs - The costs to sub-lease these spaces are known. There won't be any construction or furnishing surprises. Prospects will know their all-in cost to lease from the start.
In this market and given the choice, it's not surprising that prospects will choose to sublet. Your current service model is failing to compete with what subleases can offer to prospective tenants. But how do you offer better service without giving up your margins?
The FastOffice Difference
We can enhance your service model. Our technology enables you to offer better design, better terms, and concrete costs to your prospects, without the costs normally associated with those services. Not only can you compete with subleases, but you can actually offer a better product. Here's how it works:
Design - Prospective tenants can request a free test-fit session with one of our design team members. Over a 30 minute conference call, we can redesign the space to fit their needs in real-time. Prospects will know for certain that the space fits them.
Terms - Our software allows you and the tenant to estimate the costs of leasing on different lease terms. You can make informed decisions about what is reasonable and profitable.
Costs - FastOffice provides prospects a comprehensive budget. This includes TI and furniture, and with our partners CORT, we can lower the upfront cost of buying furniture by allowing them to lease their furniture.
This means that when you get a prospect interested in your smaller space, you are able to offer a fully furnished, flexible term, turn-key office, without breaking the bank. When a prospect has to choose between a sub-lease and your space, they will choose your space - the private, custom option.