TenantSee Weekly: The Restructure
In markets like San Francisco where availability stands at ~30% and continues to rise, landlords of all stripes have either experienced or are poised to experience gaping holes in their occupancy. At the same time, occupiers having remaining term and paying pre-pandemic rents (meaning rents that are way above current market) are watching the building bleed tenants and seeing the landlord market comparable space at a substantial discount to their in-place cost with massive concessions. This is the perfect environment for restructure transactions.
TenantSee Weekly: Swimming Naked: The Risk of Non-Performing Vacancy
Over the past decade the San Francisco office market was among the most desirable global markets for institutional office investment. Valuations increased by 100%+, and many assets traded…some multiple times. Even those that didn’t trade were often refinanced at substantially higher values, enabling the equity partners to take out significant amounts of capital. Today values are dropping as demand for office space in San Francisco is at historical lows, causing rental economics to decline rapidly. This presents unique challenges that are (typically) not entirely obvious to occupiers; namely, a full understanding of the debt and equity stack and the landlord’s ability to perform.
TenantSee Weekly: Why Flex is Hard (but Inevitable)
The “flex” in flexible office solutions is about the occupier’s ability to limit commitment. A one-year lease is more flexible than a two-year lease, so on and so forth. With occupier uncertainty about why, where and when they should provide office solutions for their employees at an all-time high, you’d think landlords would be eager to offer high flex options in order to meet demand where it’s at. However, it’s difficult for landlords to provide the flex product, despite its potential to command premium rents and increase demand. Why? Because it’s expensive to build office space, and it’s difficult to design space that has broad residual appeal to a large swath of occupiers.
