Let's Talk: Is It a Tenant's Market?

Let’s Talk: Is It a Tenant’s Market?

If you’ve been following commercial real estate news, you’ve probably heard the phrase “tenant’s market.” But what does that actually mean and does it apply today?

A tenant’s market typically stems from supply significantly exceeding demand (or trending that way), so tenants looking for space have the upper hand compared to landlords.

In these conditions, tenants have more negotiating power for rent, concessions, lease flexibility and other lease terms. Recent trends like increased vacancy and the rightsizing of tenant space following the COVID-19 pandemic have created opportunities for tenants in many markets.

Key indicators of a tenant’s market

1. Greater than 10% vacancy
2. Rightsizing of space
3. Landlords competing to fill vacancies
4. “Cranes in the sky” - Indicating a hot market with new construction, investor confidence, and increased supply

Not a One-Size-Fits-All

Whether the “tenant’s market” is truly working in your favor depends on various aspects of the space you’re looking for, including:

• Asset Type:
  
  • Office: Many office markets, including Washington, DC, currently favor tenants in search of space.
  • Industrial: Demand for industrial space remains strong, fueled by e-commerce and logistics growth. While some markets are seeing additional availability, conditions generally favor landlords more than tenants, making industrial a more balanced or slightly landlord-leaning market compared to office.

• Building/Space Quality:
  
  • Top-tier (“trophy”) buildings: These high-end spaces are still in short supply because companies continue to prioritize quality, and no new speculative construction is coming online. Since demand outweighs availability, these buildings do not lean tenant favorable.
  • Mid-tier and older buildings (Class B or “commodity” space): These buildings have far more vacancies, giving tenants significantly more leverage. In this segment, renters often see lower rents, high concessions, and more negotiating power.

For companies approaching a lease expiration or considering a move, this can be an ideal time to renegotiate, relocate, or rightsize. Market conditions can change quickly, so acting early is important.

As you evaluate your options, it’s important to understand the varied implications of market trends and how they can be worked in your favor. An experienced advisor can help you:

• Understand local market dynamics
• Benchmark rent and concessions
• Plan strategically to maximize opportunities

Cresa exclusively represents tenants. Connect with our team to explore your options, negotiate the best terms, and take full advantage of today’s tenant-friendly market.