[:he]The office rental market underwent a dramatic change in 2007 when a new type of investor entered the scene. As a result of the structural change in the market, the monopoly of the large entrepreneurial companies on office buildings was broken, which made the market more competitive and gave more power in the hands of the tenants in negotiating the rent, the terms of the lease and even in adapting the office space to their needs, without compromising on location.
What caused the dramatic change
Traditionally, the office building industry belonged to the large entrepreneurial companies. A company that wanted office space in a certain area or building had to accept the lessor’s rental fees and conditions, with very little margin for negotiation. The change began in 2007, with the flourishing of the purchasing groups, and the adoption of the concept in the field of commercial real estate as well. Small entrepreneurial companies and private investors entered the field and practically broke the monopoly that the old entrepreneurial companies had.
Competition with the neighbors from above
If in the past, a building in its entirety and even an entire area was under the control of one company, then in the structure of a purchasing group, each space owner has the option to set a price and terms that suit his situation. The tenants who previously faced a single landlord, were opened to choose between different properties, at different prices, in the same building or office area. The new competition has changed the rules of the game and gives renters a significant advantage. It allows them to enjoy a larger selection of different properties, a wider price broker and improved conditions, and obliges the property owners to maintain competitive conditions and conduct themselves according to open market rules. This competition also led to higher quality office space.
The other side of the coin
Along with the advantage for tenants of spaces up to 1,000 square meters, for some companies the change in the ownership structure of office buildings is not positive. Companies that need larger areas, several office floors in the same building for example, may find themselves having difficulty finding continuity of ownership of a large area and will be forced to compromise and choose another building that belongs to a single company, or conduct complicated negotiations with several property owners. For these companies, the possibilities have narrowed, and their power has weakened against the big entrepreneurs.
An office space that exactly suits your needs
Whether you are looking for a small office space or the rental of an entire building, getting to know the office rental market and using professional help will help you find properties that are more suitable for the company’s needs and reach better rental agreements. The Yair Levy Real Estate Strategy Company provides business real estate consulting to companies, for more information regarding the office rental market we invite you to contact us.[:]
