The following Q&A was completed as part of our conversational Commercial Real Estate FAQ Interview Series, we hope you find it helpful:
While discounts don’t abound in the leasing space for commercial real estate right now, top quality spaces are a hot commodity. While 5 to 10% is what you’ll see in terms of discounts in some spaces, this could change as the pandemic continues to run its course. Instead, larger companies are looking for the best spaces available in this time of uncertainty.
Richard Wilson: During the pandemic and Covid, what type of a discount are retail commercial real estate spaces leasing for, or selling for? We’ve had several questions around this coming in to us directly, and I’m just curious what you’re seeing as kind of an expert in this marketplace. If someone’s looking to sign a lease, or buy something now, is it 5%, 10% discounted? Is it much greater? What’s kind of like the fairway of the discount people are applying?
S.L. Van Der Zanden: The leasing that my team is doing, we haven’t seen – it’s no more than 10% for sure. It’s more closer to 5% I would say at this point. It’s just they’re pickier about the space, and they don’t feel as pressured to make a decision because there’s fewer people out there. I think there will be more sizable discounts coming up as this plays out, but at this point people are still shell-shocked. There’s so much uncertainty that people don’t know how to price it, and so really on the leasing front from the people that are out there are smart companies that want to get more space and they want to get the best space available. So they’re out nailing them down at a time when landlords are pretty flexible.
Richard: I see. So it might be less about what exact percentage might be binary, like the best spaces are getting a lot, and other spaces are getting no viewings at all because…
Van Der Zanden: Exactly.
Van Der Zanden: You have an empty drive-through space, Starbucks is knocking on your door, you know? It’s that kind of situation.
Richard: Right, right. Okay.