Pity the office space shopper who believes what he or she sees in front of most office buildings these days. With all the “For Lease” signs in downtown and in other locations, the unwary prospect could get the impression there is an abundance of office space readily available and adaptable for tenants of all sizes.
Nothing could be further from the truth.
Sadly, many, if not most signs littering the front of office buildings throughout San Diego County have as much currency and relevance as a book on how to prepare for the Y2K crisis. In Sorrento Mesa, for example, there are at least 300 leasing signs blaring at those passing by. Truth is, you can count on two hands the number of available office spaces ranging from 25,000 to 60,000 square feet in that area. And, it’s not much better for smaller users, either. The space drought applies to the typical 10- to 40-person middle-market company that needs between 2,000 and 10,000 square feet.
Today’s office market is at the highest occupancy rate it’s been at for the past decade. Throughout the county, office vacancies range anywhere from full absorption to 12 percent — considerably lower than the 25 to 30 percent vacancy rate of the early ’90s. Even taking into account the increase in office space inventory since then, there are far more leasing signs on display in today’s tight market than in days when there was real space to lease. You wouldn’t know it by the deluge of signs, but it’s tight out there, folks.
So, why all the signs?
Once we dispel the myth that most leasing signs have something to do with space availability, we can focus on what the real objectives of signs are. There are at least three motivations.
First, signs exist to stimulate what’s referred to in the brokerage community as “drive by calls” or “sign calls.” The prospective tenant sees the sign, calls the phone number, only to discover right away that there is nothing available at that location. However, the broker now has the caller in tow and proceeds to try to switch him or her to another location. I’m not suggesting this is “bait-and-switch” in any technical or legal sense whatsoever, but the practice does bring that phrase to mind.
The second motivation deals with the trouble and expense in continually putting up and taking down signs. It’s an expensive process and, in most buildings, there is enough office space turnover to rationalize leaving a leasing sign in place. Sooner or later, the sign will be timely and accurate, if only for a brief instant in today’s brisk market.
Signs are great broker advertisements is the third reason there are so many signs for so few office vacancies. Brokers stake territory with signs to show landlords, tenants and anybody else their dominant position in the marketplace. Some brokerage firms actually conduct contests among their leasing brokers to see who can get the most signs up in front of buildings. Under this scenario, signs are an outright marketing ploy for brokers, not an informational tool for consumers.
Having spent the last several paragraphs decrying the creative use of leasing signs, let me be clear that I am not suggesting there is anything illegal or unsavory about brokers putting up and keeping leasing signs on properties that have no available space. However, promotional and inaccurate signs do not serve those who are looking for office space. Searching for buildings to lease space in can be a frustrating and unfruitful experience for tenants who try by themselves to find their way to available office space through all the visual noise of leasing signs.
Tenants who are serious about locating space they can use in an area that makes sense need assistance from office property specialists whose primary job it is to locate space and represent tenants in negotiating optimum terms and conditions. That criterion narrows the field considerably, given the vast number of brokers using promotional signs out there.
Jason Hughes is chairman, CEO, and owner of Hughes Marino, an award-winning commercial real estate company with offices across the nation. A pioneer in the field of tenant representation, Jason has exclusively represented tenants and buyers for more than 30 years. Contact Jason at 1-844-662-6635 or email@example.com to learn more.