Industry Trends

Time for a New Commercial Lease? Rental Prices Are Down … And Up

Aug 10, 2022 • 2 min read
commercial real estate lease
Table of Contents

      Rental prices are down.

      You heard that right: while housing prices have skyrocketed for consumers (side note: they are showing signs of stabilizing), rental prices on commercial real estate — in particular, office property — have actually fallen.

      True, the drop was only 2.6% year-over-year for office space commercial leases, but when you compare that to the high demand and price for residential space, falling prices due to limited demand in anything labeled “real estate” is newsworthy. According to Commercial Edge, “Only Boston has a [office] vacancy rate of below 10%.”

      But those stats aren’t the whole story, since it takes more than office workers to run an economy. Manufacturing, for example, is seeing a demand for industrial real estate, which hit a 27-year occupancy low in May 2022. Warehouse vacancies are hovering around 6% nationwide and new construction is booming. Retail space vacancies are also down, according to Realtor.com, which is pushing retail rental prices up in some markets, too. 

      Small Business: Good Time or Bad Time to Find a New Commercial Rental?

      Ready to sign a lease? If you’re a small business, it may pay to dig around online for trends in your state and local market before you do (unless, of course, you need the space ASAP). Offices, particularly in big cities and on the coasts, are sitting vacant as a result of work-from-home and remote arrangements with employees. In those markets, you could line your business up with a screaming deal on office space. 

      Not ready to move your business to the Big Apple? You may appreciate this fact, too: conditions vary across the country. The New York Times reported earlier this month that in mid-sized and smaller markets, employees are clocking fewer remote days with more returning full-time to in-person desks and cubicles. If Columbus, Ohio, is the place your business calls home, commercial real estate rental rates and demand may not be quite so enticing.

      BTW, industrial space is not following those same trends. Demand is up and, says The Real Deal, so are prices.

      Securing space for your small business is all about supply and demand. So before you sign, do a little research. See what’s hot and what’s not in your market. In some parts of the country, this could be the perfect time to dive into a new lease. In other markets, you may want to try to make your current space fit just a little longer.

      About the author
      Jeanie Croasmun

      Jeanie Croasmun is a writer, editor, and all-around news junkie who voluntarily (and gleefully!) listens to economics podcasts while she runs. She writes on current issues and other topics related to small business finance for Lendio.

      Share Article: