Weekly Market Insight • Average Lease Term • 8/29/11

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Average Lease Term August 29, 2011
Source: Grubb & Ellis
Average lease terms remain low by historic standards for both office and industrial space. The average industrial lease term year-to-date has dropped to a decade low of 44.0 months. Third-party logistics firms have been most active recently, and they prefer shorter-term leases that co-terminate with their logistics contracts, often three years. The average office lease term of 56.3 months is the second-lowest level of the decade, slightly above the recession year of 2009 and tied with the recession year of 2001. The trend toward shorter-term office leases may be driven by the preferences of both tenants and landlords. Businesses have been reluctant to hire and to tap into their cash reserves, and shorter lease terms fit with this conservative mindset. For their part, landlords aren’t anxious to sign long-term leases until rents start to firm, which hasn’t happened yet in most markets. Now is a good time for tenants to sign longer-term leases if they feel confident in their revenues and if they can convince their landlords.
Robert Bach, Senior Vice President, Chief Economist, has 30 years of professional experience in real estate market research, consulting and city planning. His commentary on the real estate markets is provided here on a weekly basis.

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Robert Bach
Senior Vice President, Chief Economist

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© 2011 Grubb & Ellis, all rights reserved.

About CRE Northwest

Specialist in office & investment real estate in Seattle & the Eastside
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