Some landlords operating in the office market these days are largely grateful for whatever lease they can tie up in order to fill vacant space. Still, those landlords have favorites.
Companies in the legal, banking, finance and insurance industries are among the leading "dream tenants" for office landlords based on their willingness to sign longer lease terms and pay higher rents compared to other office users, according to a JLL report.
Law firms in particular sign deals for terms longer than any other company, averaging close to eight-year leases, providing the landlord a sense of stability that has been largely absent from the office market since the onset of the pandemic more than four years ago. By comparison, a majority of tech companies signing deals for new office space choose leases that average about five years, according to the report.
Tenants in the banking, finance, insurance and real estate industries lead in terms of how much they pay for office space, underscoring their preference for locations in the highest-quality buildings in the most desirable neighborhoods. Companies in these industries pay an average base rent of $95 per square foot, according to JLL, while media, public relations, telecom and entertainment companies largely pay at the lower end of the spectrum with leases that average about $61 per square foot.
Across the United States, commercial property leasing has fallen nearly 15% from its annual average in the years leading up to the pandemic. Yet, with companies such as Kroger, UPS, Amazon and IBM formalizing return-to-office policies, some are now more willing to commit to longer-term leases.
The national office market still has a large gap to close before it nears its pre-pandemic levels of leasing activity with its vacancy rate remaining at a record high of nearly 14%, according to CoStar data.