January 18, 2017
By: Kameron Schroeder, Vice President, JLL Walnut Creek
Large tenants — those needing 15,000 square feet or more of Class A office space — face a dilemma in the East Bay’s popular Walnut Creek/I-680N corridor market: very few large blocks of space are currently available for lease.
Walnut Creek has rapidly become one of the region’s most popular submarkets due to it being a high density/transit-oriented commuter hub, particularly attractive to the Millennial generation. With office space in Walnut Creek being in high demand and no new construction on the horizon, tenants considering Walnut Creek are finding themselves in a highly competitive environment.
Photo credit: JLL – Chart of the Week
The reality is that if you are an office user looking for space less than 10,000 square feet in Walnut Creek you have options. But, as the graphic above shows, if you are looking for a Class A office space over 15,000 s.f. there are just two blocks available in Walnut Creek today with one more becoming available later this year.
Tenants Must Adjust
How should bigger tenants approach the issue of limited large-block availability? First, tenants should reassess and refine their timeline for real estate decision making and planning. Users who commonly adopt a 12-month timeline for planning to either renew their existing lease or search out other options in the market should consider stretching the timeline out 18 or 24 months to give themselves greater flexibility and maximize their options. Being proactive with regard to renegotiation also eliminates the perception of being a “captive tenant” leaving enough time for “Plan B” if renewal terms are not mutually agreed upon.
In Early Negotiations, Both Parties Can Win
It is important to remember that landlords and investors may be looking to capitalize on current capital markets conditions and exit their investments. A proactive negotiation with a large tenant to renew a lease early could add value to a potential sale of the asset, and tenant’s should share in the value their tenancy generates. For example, landlords may be willing to invest tenant improvement dollars early to reposition and refresh a tenant’s space in exchange for a long term recommitment to the building. Beginning that discussion early can benefit both tenant and landlord.
Not all negotiations go the way that either tenant or landlord desire or expect. In a hyper competitive marketplace like Walnut Creek today, chances are that other big tenants may be eyeing your space, or space that you would like to move into. However, by beginning the process early, tenants at least give themselves a little extra room to maneuver. While Walnut Creek is a highly desired market, neighboring submarkets like Pleasant Hill and Concord, which also have access to BART and high-density housing, can offer large tenants good/less expensive alternatives.
About the author:
Kameron Schroeder is based our Walnut Creek office and provides brokerage services to clients in the East Bay and throughout the San Francisco Bay Area. Kameron focuses exclusively on tenant representation and specializes in the representation of Fortune 1000 companies.
Contact Kameron directly by phone at +1 (925) 944-2149 or via email at Kameron.Schroeder@am.jll.com.