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Uptick in Concessions Means Q2 Decline in Net Effective Office Rents
Office building owners provided more free rent and larger tenant-improvement allowances in the second quarter to secure new office leases and renewals amid a general slowdown in leasing activity due to the pandemic, CBRE says in a new report. The concessions led to 6.6% year-over-year decline in net effective rents in the 15 largest U.S. markets.
The average length of free-rent periods rose to 10 months in Q2, up 13.7% over the prior quarter. Another measure of concessions – tenant-improvement allowances – increased by 5.1% from Q1 to reach $75.57 per square foot.
“Overall, U.S. office-leasing activity declined by roughly 43% in the second quarter from a year earlier, so it is to be expected that building owners would need to occasionally use some sweeteners to nail down a new lease in this tough environment,” said Whitley Collins, CBRE global president of occupier advisory & transaction services.
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