The tides have shifted in the office leasing world, and tenants are now firmly in the driver’s seat. Following four challenging years for office landlords, a wave of lease expirations is creating a golden opportunity for tenants to negotiate better terms and reshape the landscape of office occupancy.

In an unprecedented turn of events, over 217 million square feet of office leases are set to expire in 2025 alone, with another 202 million square feet following suit by 2027, according to Cred iQ.
This mass expiration and historic office availability rates have created a renter’s market like never before.

“What we’re seeing now, in the last 24 months, I’ve never seen before.  There were times when tenants had the upper hand, but it’s not like this.”
— Serge Vishmid, Managing Principal of Atlas Capital Advisors.
A tenant representation specialist.

Deals of a Lifetime

The current market conditions have led to remarkable negotiations for tenants, with significant reductions in rent and enhanced lease terms. For instance, a Southern California tenant occupying 21,000 square feet was prepared to renew their lease at a seemingly favorable rate until a competing landlord offered a deal 20% lower. Unsurprisingly, the tenant took the better offer.

“Then, at the very last minute, we got a phone call from The Irvine Co. They told me,
       ‘We’re going to be sending you something, and it’s not a mistake.’
I got it and I thought it was a mistake.” —-Serge Vishmid

These kinds of scenarios are becoming more common. Rich Lane, Executive Vice President of Tenant Advisory at Transwestern, notes that tenants are now enjoying unprecedented rental abatements and tenant improvement allowances. However, landlords who resist proactive negotiations often find themselves losing tenants altogether.

Proactive Engagement: The Key to Retention

Landlords who act early stand a better chance of retaining tenants. Lane’s experience underscores this point: “Depending on the size of the tenant, landlords should embrace this opportunity to restructure leases two to four years before expiration before the tenants become free agents in the market.”

Out of five tenants Lane represented in recent renegotiations, four moved to new buildings due to landlords’ unwillingness to engage early. The lone landlord who initiated early negotiations managed to secure a 12-year extension with a 45,000-square-foot law firm. This highlights the importance of preemptive action to avoid losing tenants to more competitive offers.

A New Role for Lenders

In some cases, even lenders are stepping into negotiations, especially as office spaces increasingly end up in their portfolios due to delinquent loans. One such case involved a 74,000-square-foot tenant in Orange County, where the landlord’s lender initially restricted rent reductions. However, the landlord eventually offered a significant rent cut and additional concessions, such as parking, to retain the tenant.

Market Variability: Geography and Building Quality Matter

While tenants have significant leverage overall, not every negotiation is a win for them. Geography and building quality play critical roles. For example, in South Florida, where office vacancies remain relatively low, landlords often retain the upper hand for high-demand Class-A properties. Trophy properties continue to command premium interest, which had a 17.7% direct availability rate nationwide per the 2024 first-quarter report by Avison Young Data

The Bigger Picture: Trends in Tenant Demand

Despite regional variances, tenant demand is growing across the board. JLL’s tenant-in-the-market index shows a 28.3% annual increase, reflecting a rebound in office demand. Tenants are leveraging the current market dynamics to upgrade to better spaces or negotiate highly favorable terms, fundamentally reshaping the office leasing landscape.

For tenants, the current market represents an extraordinary opportunity to secure advantageous deals. For landlords, the message is clear: adapt or risk losing valuable tenants. By engaging early, understanding market dynamics, and offering competitive terms, landlords can navigate this challenging period and position themselves for long-term success.