Office users are tabling lease negotiations as much as possible as the pandemic rages on. According to Jeff Ingham of JLL, office users are falling into three categories: those that don’t have a lease expiring; those that were planning on expanding; and those that have a lease expiring. In all three cases, tenants are looking for ways to delay inking a long-term lease until there is more clarity about the pandemic and long-term work trends.
“If people can delay the decision, they are delaying the decision. On the expansion side, if a tenant needed expansion space, they are slowing that down,” Ingham tells GlobeSt.com. “They might need the expansion space, but they don’t know; so, tenants are kicking the can down the road. For tenants that have a lease expiring, there are two groups. For tenants with a profitable business, they are moving forward like nothing have changed and making it happen. You have got some groups that want a one-to-two year extension because they don’t know what they are going to need.”
For the tenants asking for extensions or short-term leases, landlords have been flexible and cooperative. “A lot of landlords are agreeing to extensions because they want to maintain occupancy in the building,” says Ingham. “They are concerned that people can work from home and they will just flip the switch and close the office—and it is easy to close and office right now.”
However, the uncertainty won’t last forever, and Ingham expects people to be working in an office again once it is safe. There will be some long-term trends that emerge out of the pandemic, and they could actually benefit Orange County. “There are a lot of people that are looking to make moves for quality of life factors. This was happening before the pandemic hit,” says Ingham. “People were moving to Orange County from more dense areas, like L.A. Now, with denser working, two things are going to happen. First, more people will be focused on the quality of life connected to working from home. I think that will benefit Orange County in the long term because of the quality of life factors that we have.”
In addition to space, Orange County also has a healthy stock of low and mid-rise office product. That will also be a benefit in a post-pandemic world. “I think that we are going to see more suburban office and smaller spaces,” says Ingham. “I don’t think that people will want to work from home, but I also don’t think they are going to want to be in a dense CBD with high-rise buildings. There is going to be a horizontal trend that will benefit Orange County.”