Monday, October 10, 2005
Everything from Coffee to Tissues…
Office Vacancies Hit 3 ½-Year Low; Rents Rise
Vacancies in the nation's office market fell to their lowest level in 3½ years in the third quarter while rents rose, a new survey said….
Effective rents -- the amount of money a landlord takes in after factoring in concessions to tenants -- rose for the third-straight quarter, heading up 0.8% to $20.41 a square foot from $20.24 in the second quarter. That is doubly good for office owners because asking rents went up just 0.6% in the quarter. That means landlords are dropping the concessions, like free months of rent, that they have used to lure tenants for the last four years.
So reports today’s Wall Street Journal, and to the facts it contains I can testify, based on the following excerpts from a letter, just received, from my office manager:
Some of you have had no increase in rent or service charges for three or four years… As I look ahead, I must candidly advise that we will begin implementing periodic rent and service charge increase to offset rapidly increasing expenses in each of the following areas:
1. Base Rent: Our rent to the landlord increases periodically….
2. Building Expenses and Real Estate Taxes: The building’s operating expenses (including electricity) and property taxes have risen rapidly and are likely to increase further…..
3. Healthcare Costs: Personnel costs are now much higher, largely due to increases in healthcare costs….
4. Consumables: Everything from coffee to tissues is more expensive today.
These trends should not surprise anyone…. My plan is to establish a pattern of reasonable periodic increases to stay ahead of rising costs.
I have no complaints: our office manager is both personally a very nice man, and also a very fair and responsive businessman. The letter is, as he himself is, straightforward and plainspoken.
Consequently, it is hard to argue with, so I will, of course, pay the “periodic rent and service charge” increases.
There is no arguing the fact that I have not had to pay such increases in the last few years, nor is there a debate about the rising real estate taxes, higher healthcare costs, and even the price of coffee.
My only argument is in that last paragraph—“These trends should not surprise anyone.”
Surely there is a long bond holder out there who hasn’t yet gotten the memo.
I Am Not Making This Up
© 2005 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations.
Posted by Jeff Matthews at 7:52 AM