Where Did All of the Office Tenants Go?
Currently, in Billings, it is estimated that we are experiencing a 20% vacancy in office space right now – far surpassing vacancy in retail, industrial or multifamily properties. But this trend is not specific to Billings. We see it nationwide which is forcing landlords to get creative in both attracting office tenants and repurposing their properties.
The greatest demand for office space is in the 1,500 SF or less range. Demand for the 5,000 to 15,000 SF office space is minimal. Multiple downtown landmark buildings are suffering from large tenant exits, and increased Class A office building availability on the west end. The Heights has experienced mixed results.
One proven national trend now just catching on in Billings is office sharing and coworking space – WeWork being one of the leaders nationwide for example. With an explosion of entrepreneurs and small business owners, these executives are looking to move out of their home office and into professional office space with both amenities and community. Coworking spaces are designed to provide such a space with a mixture of collaborative spaces, private offices, snack bars, high speed internet (fiber), modern industrial ambiance and social events – all with the flexibility of not having to sign long term leases. Within the last year, Bhive WorkSpace (Broadwater), Big Sky CoSpace (West End) and CoWork Billings (downtown) have all come to Billings in hopes of attracting solopreneurs who need a professional place to work.
The US Bank building downtown has had success with demising larger vacant office spaces into smaller 1-4 employee offices and upgrading them to meet today’s demand for more modern office space. US Bank has also experienced the loss of an anchor tenant and currently has office spaces for lease in the 7,500 to 16,500 SF range — which is not atypical for downtown in our current office leasing environment. Coldwell Banker Commercial is working creatively to find a tenant for this large office space.
With a large amount of inventory and weak demand for office space, landlords are offering free rent, including office furniture in some cases, providing generous tenant improvement allowances or more flexible lease terms. So where have all the office tenants gone? Technology has allowed businesses to do more with less office staff. Experienced C Level executives are breaking out on their own to start small businesses (1-4 employees), oil related companies have left due to the slowdown in the Bakken and more people are working from home.