Landlords to Enjoy Greater Negotiation Leverage for Big Block Office Leases in U.S.

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According to CBRE's research of the largest U.S. office markets, commercial tenants in most markets are unlikely to see an up-tick in the number of large block options during the balance of 2016.

In fact, just three of the 21 markets surveyed indicated expectations for an increase: suburban Houston due to softness in the energy industry, and suburban Dallas/Ft. Worth and downtown Seattle due to active construction pipelines.

By comparison, the number of blocks increased in six markets during the previous six months. Houston is the only market expecting an increase in large block availabilities in both Class A and Class B space.

On the flip side, owners in markets with decreasing availabilities and improving demand are poised to benefit. Construction is very limited in many of the suburban markets in which the number of large blocks is expected to decrease or remain unchanged during the next six months.

In some markets, rents remain below levels needed to make speculative development financially feasible, constraining supply even as tenant demand strengthens.

Given CBRE's expectations for continued solid job growth, even amid recent financial market volatility, owners will likely experience greater leverage in negotiations, especially for high-quality properties in submarkets with amenities such as easy transit access, walkability, and ample retail and entertainment options.