Law firm Michael Best & Friedrich’s new 25,000-square-foot downtown Salt Lake City office is so spacious, it could be a roller rink. It’s also currently empty.
Soon, however, the raw space will turn into offices and conference rooms. Plants and maybe even a pickleball court will sprout on the large balconies overlooking Main Street.
“We’re lawyers, and so we spend a lot of time at the office,” said managing partner Steven Joffee. “For me, getting out in the sun just makes my day go much better, makes my team’s day go much better.”
The firm plans to close its Cottonwood Heights and downtown offices and consolidate all its employees in one space on 650 Main, Joffee said. “I think that reflects our commitment to the state, our commitment to building our brand stronger here,” he said.
The best place to do that? Downtown Salt Lake City. “We got the space because we’re just betting on downtown continuing to grow out,” he said.
Plus, the firm negotiated several concessions and a phased move-in schedule to give it time to transition into its new home.
Joffee’s was likely a safe bet. Downtown Salt Lake City is currently a tenant’s market, commercial real estate experts say — if you know how to navigate it.
By volume, there is more available office space to rent downtown today than there was in 2019, before the pandemic redefined the workforce and turned dining tables into office desks.
According to data from Hughes Marino, a commercial real estate brokerage that works only with tenants, “class B” office availability is nearly double what it was in the final quarter of 2019. Class A office space availability did not expand as dramatically, but still grew from 19% to around 23%. (Class A and B are distinctions that generally indicate how new and well-equipped a space is; Class A offices are newer and have more amenities.)
Salt Lake City’s real estate market is also less volatile than some of its similarly sized urban centers, said Lora Munson, executive vice president of Hughes Marino’s Salt Lake office.
That’s a good thing for commercial tenants looking to move into a new office, or even renew their current lease, Munson said. More availability means more choices and more room to negotiate.
It’s not rental rates on the bargaining table, Munson said. Rent is the last thing landlords and property owners are going to change. That’s because the building’s overall value drops “exponentially” for every dollar in decreased rent, Munson said.
Indeed, while rental availability has grown in recent years, rental rates have hardly changed in either category. In fact, class B offices are slightly more expensive per square foot, on average, than they were at the end of 2019, according to Hughes Marino data.
San Francisco’s rental rates, meanwhile, have been cut nearly in half — a sign, Munson said, that the coastal city’s real estate market is more volatile and more vulnerable to outside influences than Salt Lake City’s.
According to a report for the McKinsey Global Institute, San Francisco was one of the cities most heavily affected by the remote worker trend, in part because offices represent roughly a third of all the city’s real estate. Largely vacant office buildings are being sold for fractions on the dollar, according to reporting from the San Francisco Chronicle and the San Francisco Standard.
Salt Lake City, meanwhile, keeps growing. It largely emerged from the pandemic healthier than it was, according to research from UC Berkley and University of Toronto. More office availability, in Salt Lake’s case, does not necessarily mean a dying downtown. But it does create opportunities for businesses looking to move or expand, Munson said.
And while landlords aren’t likely to offer decreased rent, there are plenty of other things with which to bargain, Munson said. Some landlords might offer a few months of free rent as an incentive — which doesn’t technically change the rental rate, Munson explained, so does not lower the building’s overall value. Residential buildings sometimes make the same offer, based on the same principle.
Tenants can also ask for such things as office improvements, extra amenities or lower operating expenses. Landlords may be more flexible with lease terms, Munson said, but the tradeoff is that they’ll likely be less willing to make major improvements on shorter leases.
(Francisco Kjolseth | The Salt Lake Tribune) Steve Joffee, managing partner at the law firm of Michael Best & Friedrich LLP, describes plans for their new office buildout of the 6th floor at 650 Main Street in Salt Lake City on Tuesday, June 18, 2024. The law firm recently signed a ten year lease after finding the new location easily accessible to the freeway and predicting beneficial growth in the area.
How to find a perfect office when no one wants to work in an office
There’s a harder, more philosophical challenge commercial tenants and landlords alike face today: justifying the need for an office to a remote or hybrid workforce.
Some degree of remote work is likely here to stay, according to workforce analysts. Not everyone wants to commute to an office if they don’t need to.
“This is not a ‘Field of Dreams’ situation,” Munson said. Workers will not come to an office just because it exists.
But it is also reshaping what a “good” office looks like.
Offices are shrinking — or, they’re being retrofitted to feel less like a corporate office and more like a home/co-work space.
“A lot of our fitness facilities look like something you’d see in a higher-end hotel than what they had been building out previously,” said Nadia Letey, senior vice president of the commercial real estate business CBRE. “It’s a shift not only in seeing more amenity space coming into the market, but it’s nicer and it’s located in the better part of the building, because these employers are truly using that as an incentive to get people back to the office.”
Subleasing and subdividing are also becoming more popular, Munson said. More than 1 million units have been put on the sublease market in 18 months, according to Hughes Marino data. Businesses just need less space, Munson said, and some are willing to share.
If offices aren’t shrinking, they’re getting more comfortable. Commercial tenants want their spaces to foster collaboration and feel welcoming, Munson said, adding that top floor spaces are in higher demand because they offer better light.
“The majority of us are in the office almost every day,” Joffee said. Their work requires in-person collaboration. But still, he said he hopes the perks in his firm’s new office — the building has a full gym, outdoor patios with fire pits, and lots of natural light — will even further entice employees to come in.
“We wanted to differentiate ourselves from some of the smaller local firms by having really nice office space,” Joffee said, “but also having space that’s comfortable, so people can spend a lot of time and not feel like they’re just like slaving away on on endless assignments.”
(Francisco Kjolseth | The Salt Lake Tribune) Several floors of available office space are available at 650 Main in Salt Lake City where the law firm Michael Best & Friedtrich LLP has recently signed a lease to take over the 6th floor, pictured on Tuesday, June 18, 2024.
Tenant pro-tips:
Is your business looking for an office downtown, or looking to renew its current lease? Hughes Marino offers these tips:
Plan ahead and use time as “leverage.” “Knowing when to go to the market is key,” Munson said. If you start the search too early, you might not see all the available options. Too late and you lose some negotiating power, Munson said.
There’s more to a negotiation than rent, and rent is likely the last thing landlords will change. “There are multiple profit centers in a lease,” Munson said. “Focus on the others to achieve a win-win result.”
Don’t be too eager. “The worst thing you can do is say how much you love a space,” Munson said. Even if you’re just trying to renew a lease, Munson said, it’s useful to explore other options and create some “competition.”
Talk to an expert who can help you navigate the market.
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