The problems with leasing class b and c office space

Real Estate Weekly, Feb 18, 1998 by David Brimlow

For brokers shopping a small space tenant, it has become more and more difficult lately to get access into many Class B and C side street buildings. And it is becoming rare to actually reach a leasing rep or agent by phone - nine times out of 10 you can get shunted to voice mail.

When shopping small space customers, time management is crucial, and often setting up an appointment time for the next day isn't feasible. A broker needs to get them into as many spaces as possible in a short period of time. There is the occasional receptionist who tries to be helpful but does not have the authority to contact supers or someone who can show the space.

There are only so many listings in-house or on a computerized listing service that a broker can pre-arrange the day before. Often a deal could be done easily by either passing a building with a sign on it, calling the agent's number and getting instant access, or calling an hour or so before meeting the customer. But for some reason, relatively fast access is unlikely. It is a dilemma that has caused many brokers to simply avoid small space leasing.

Our office has recently been inundated with customers looking for small space 800 to 3,000 feet. Many of these customers are start-up companies and want to start small for a year or two until their business takes off, but a good percentage have either had their existing sub-lease or main lease expire and/or just want a change.

The type of small space customer we've been getting lately is typical - seeking below 30th Street and approximately $15 to $20 per foot. This is not a customer brokerage firms care to shop. They are generally unrealistic in their expectations and need to see many spaces before realizing that they have to make due or raise their price range. Spaces in the $15 to $20 price range tend to be raw or in older, not well-maintained buildings. While upgrading the customer's price range sometimes does help, it comes at the expense of having previously shopped them toe dozen or so spaces that simply couldn't work, thereby leaving the tenant no choice. And while increased price finds somewhat better space, it is generally still below the tenant's initial expectations.

A broker still needs to "sell" the customer on the benefits of one given space over another. For a broker, this is time-consuming and not cost-effective for the small potential return. Many brokers have a cut off point where they will not bother anymore - telling the customer that they just don't have any more space in their range.

However, we've never been comfortable with alienating any potential future business, because if a good enough relationship is established, down the road when they need larger space, they'll call us first. We believe word of mouth can work in reverse, as well.

And for a relatively small brokerage and management company, we want all the good will on the street we can get. So we continue to shop the smaller tenant - despite the problems.