The finance and insurance industries are quickly becoming responsible for the biggest office leases in the US. A new report from CBRE found that the finance and insurance industry now represents nearly a quarter (7.4 million square feet) of the top 100 leases of 2022’s total square footage.
Previously, the tech industry had the most significant share of office space in the US, but the COVID-19 pandemic and subsequent rise in remote and hybrid work led to many choosing to halve or give up their workspace leases. The recent mass layoffs from tech giants such as Spotify, Google, and Microsoft have also contributed to this decline.
And while the tech industry can largely operate remotely, the finance and insurance industries are heavily reliant on in-person work for regulatory and security reasons, hence the need for office space large enough to accommodate many employees.
How does South Africa compare?
“The South African commercial real estate industry tends to follow major global trends and this shift in tenant profiles is no exception,” explains Galetti’s Gauteng MD of Broking, Cameron Smith.
“The Johannesburg prime office market has been booming over the past 18 months with well-known legal firms and insurers such as Bryte, Discovery, King Price, and Auto & General as the primary occupiers,” he adds. Major tenants of prime office spaces are also choosing to stick with their current lease rather than expanding or finding new premises, largely due to the fact that fit-out and build costs have increased exponentially.
“Packing up shop and moving operations is a major expense that is difficult to justify when many of these tenants have spent millions of rands on renovating their original space to their exact specifications. With many tenants staying put and prime space in high demand, we are seeing landlords stand firm on their lease renewal prices” adds Cameron.
“However, properties with persistent vacancies have reduced in price and landlords are offering attractive rentals to attract tenants, making this space competitive.”
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