We are seeing light at the end of the COVID-19 tunnel. I have never seen an overall disruption of the use of DFW office space in my commercial real estate career, like COVID.
After the COVID dust settles, DFW office space vacancy is presently at 19%. I am seeing many sublease opportunities for large office spaces. The vacancy rate is misleading because some markets are experiencing higher vacancies than others. The CBD markets are suffering more than suburban markets.
Space size matters. While several opportunities for subleasing large blocks of office space exist. Many small office space users are locked out because they don't need the extra square footage. Demand for smaller office space has increased because anywhere from forty to sixty percent of the office workforce is still working form home. Larger office tenants are reducing the size of their offices and are looking for smaller spaces.
Many of my clients are smaller DFW office space users. Their sizes range from one thousand to five thousand square feet. They read articles about increasing office vacancy and assume that every space is effected. This isn't true.
While I do expect to see downward pressure on rental rates. I don't expect to see significant rate reductions until we begin to see foreclosures of office buildings. Hopefully foreclosures don't happen. I saw this occur in the eighties and the only winners are the investors that buy the foreclosed buildings. Depending upon your lease structure, even tenants are at risk.
COVID will soon be a distant memory. I think that it was changed the way tenants will use office space. The important issue for tenants is to have realistic expectations when you negotiate your next lease. Understand where the landlord's are working through the impact of COVID. They are not desperate in all markets or space sizes.