BOSTON (TheStreet) — Once-unaffordable office rents in the country's most expensive cities are now free.
For a limited time, anyway. A large sign in the marble lobby of 185 Devonshire in downtown Boston, close to Fidelity Investments' headquarters and Brown Brothers Harriman's office, says: "Free Office Rent Through 12/31/09!" Across the nation, rents have tumbled as the business slump has cleared out financial districts from New York to San Francisco.
The U.S. office vacancy rate was 16.5% in the third quarter, a five-year high, according to a recent report by Reis Inc. (REIS) (Stock Quoe: REIS). Asking rates fell 1% from the previous quarter, while effective rates — (REIS) the actual price paid per square foot, including concessions such as a free month of rent — (REIS) declined 2.2%. Effective rates dropped 8.5% from a year earlier, the biggest year-on-year slump in 14 years. In New York, effective rates fell 18.5%. Reis attributes the plummet, in part, to the fall of Lehman Brothers in September 2008.
"Generally speaking, free rent in our market is readily available in the office sector," says Boyd Zoccola, vice chair of the Building Owners and Managers Association and a vice president at Hokanson Cos., a building-management firm in Indianapolis. "We're seeing much more creativity with regard to deal costs."
To that end, here are some tips to help small-business owners take advantage of the lousiest commercial office market in years.
(REIS) Get creative with concession requests: When negotiating a lease, tenants can haggle terms such as common area expenses, data and cabling costs, build-out costs such as carpeting, parking and even moving expenses, according to Zoccola, who says, "we're seeing much more creativity with regard to deal costs." He adds that some landlords are even letting tenants take their tenant-improvement allowances, the money that building owners allocate for remodeling purposes, and use the cash for a rental credit instead.