Why now might actually be the best time to sign a long-term office lease

Let’s sit down and sign a contract. It will last for 10 years, and it will cost you hundreds of thousands of dollars, if not millions. What you’ll get out of the deal will be an office. Yes, an office: the physical real estate that was deemed unsafe by the pandemic, and which continues to be an uncertain space for human use. The remote work of the lockdown days has evolved, post-pandemic, into here-today-gone-tomorrow hybrid work. As a result, office spaces are often occupied only some of the time, and in some cities they are virtual ghost towns, stacked in vertical ghost buildings, filling ghost blocks.

With high vacancy and low demand, the debts coming due on many of these buildings may simply be unpayable. But office spaces in general are not dead. Long-term office leases are being signed at pre-pandemic levels, and companies are willfully making multiyear commitments to rooms and buildings that, just a few years ago, their employees could not even enter. Contracts for these seemingly precarious spaces are being written across the country in what experts are calling an extraordinary moment for both office owners and tenants. Here is a pen. Will you sign?

“The office is not dead,” says Mark Rose, CEO of Avison Young, a real estate broker and services company. Rose has been in commercial real estate for nearly 40 years and calls this just another market trough, albeit one flavored by an unprecedented pandemic. The idea that offices are no longer needed or that most will stay empty for long is, in his opinion, unrealistic. “It’s just crazy ridiculous.”

The landscape has undoubtedly changed, though, and Avison Young’s own data backs this up. Before the pandemic, commercial real estate lease lengths in top tier cities averaged between 90 and 100 months, or about eight years. The pandemic saw that figure drop to 76 months (about six years), the lowest average in decades.