A: The market is changing. Office rates are rising. In addition, tenants are seeing building operating expenses significantly increase and "Plus Electricity" leases are becoming more common. There is new speculative office space under construction. However, these buildings will command high rental rates and are not expected to impact rates in older office buildings.
Industrial (including combination warehouse and office) is also experiencing a drop in vacancies with rental rates increasing at a modest rate as leasing remains strong. Unlike office buildings, construction of new industrial space will help to moderate the increase in rates.
Sellers continue to want high prices and will get them if their properties are well located, in good condition and have solid tenants. There are real estate investors with significant amounts of cash seeking properties that have tenants or can easily be converted to income producing property. This makes the market very competitive for Buyers who intend to use the property for their business and not primarily as an investment. Many buyers are thinking creatively and purchasing properties that at first would not appear to be suitable for their use.
On the other hand, there remains a significant amount of vacant office and warehouse space. Landlords continue to offer incentives to attract new tenants and keep existing tenants. There are still deals in leasing space!
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