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COVID, IASB Change Have Little Effect on Office Lease Terms

The threat of shorter office lease terms has been looming over the commercial real estate industry for several years. Companies first braced for the potential impact of new standards from the International Accounting Standards Board recognizing all leases on the balance sheet, which took effect in January 2019.

Then, the office leasing world was hit with additional challenges from COVID-19 as many companies opted to work from home and re-evaluated office space. Some chose to postpone new leases or long-term renewals, and opted for short-term renewals of 12 to 18 months.

However, data from Transwestern’s San Antonio leasing team reveals there has been little to no impact on office lease term from either new accounting standards or COVID-19, says Leah Gallagher of Transwestern. When analyzing internal transaction data of 835 office leasing transactions since 2016, the team determined the average office lease term in the San Antonio market is 51.8 months.

This average includes new leases, expansions, relocations, renewals and reductions. In 2020, the average lease term was 50.8 months, only a 2 percent decline from the five-year average. If focusing only on new leases, relocations and expansions, the 2020 average office lease term is 63.9 months compared to 58.6 months in 2019, a 9 percent increase, according to Gallagher.

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About Lisa Brown

Lisa Brown has decades of experience in corporate communications and marketing management with organizations including Coldwell Banker Residential, Grubb & Ellis, Marcus & Millichap, NAIOP, SIOR and ALM. In those positions, she worked in conjunction with chief executive officers and chief marketing officers to create corporate messaging, cohesive branding standards, strategic marketing plans and thought pieces. Brown is a frequent speaker at industry events and an editing adjunct professor for an online course. She has a master’s degree in mass communications from San Jose State University.

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