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As COVID-19 cases decrease across the U.S., more businesses are looking to return to the office, generating an uptick in commercial real estate leases. With hybrid office schedules the current popular option and increased demand for more office amenities, landlords and tenants are redesigning work spaces in response to employee preferences. In this article, Nichole Cortese, partner and chair of Loeb & Loeb’s Commercial Real Estate Leasing practice, discusses the current state of the commercial real estate industry and what changes the future may bring.
Nichole practices in the area of commercial real estate law, concentrating on the representation of both landlords and tenants in office and retail leasing and subleasing. In addition, she has a wide range of experience in related matters, including commercial real estate sales and acquisitions, real estate brokerage and agency agreements, and the assessment of the real estate aspects of mergers and acquisitions.
Commercial real estate leasing has changed significantly over the past two years due to the pandemic. How has the industry rebounded, and what major trends are you watching in this space?
As we emerge from the pandemic, there is a feeling of hopefulness within the industry, both in New York City and across the country. We are excited to see some vibrancy coming back to New York as more and more companies are looking to reconvene in person, even if that’s on a hybrid basis, which may become a long-term reality for a lot of businesses.
One positive trend we’re starting to see is that more companies are willing to make commitments to long-term leases rather than being hesitant to commit to space or looking to shrink their footprints, which we frequently saw during the height of the pandemic. We’ve seen the most robust response in Class A office buildings, continuing a trend that has followed prior downturns where there has been a “flight to quality,” and the buildings with the most to offer have rebounded more quickly than others. Other properties are engaging tenants by offering shorter-term leases with creative options to renew, expand and contract in an effort to provide flexibility. In all cases, landlords who have been willing to invest in creating community amenities and placemaking—creating places that tenants and their employees want to come back to—are finding that those investments have served them well. Many landlords have also worked to lure tenants back by installing robust safety measures, such as advanced air filtration systems, and committing to enhanced cleaning protocols. We hope to see these positive trends continue as we collectively explore what the new normal will bring to the industry.
What’s the one development in this space that you think is going to have the biggest impact in the next three to five years?
Over the next three to five years, it will be interesting to see whether companies make changes concerning the amount of office space they’re using and the ways in which they use it, particularly if hybrid work becomes the norm. Perhaps counterintuitively, I’m not sure if hybrid work schedules will profoundly change physical office space needs, despite having a variety of impacts on the work environment. In light of recent health and safety concerns due to COVID-19, employees may want to use at least the same amount of physical space as they had pre-pandemic, especially where they were accustomed to individual offices. On the other hand, it’s possible we may see businesses grapple with how to share the same space among several employees, for example, by figuring out how workers can share an office using alternate-day hybrid work schedules. I think this will become a sort of experiment for companies, and it will be intriguing to see how it plays out—and how it impacts companies’ leasing needs.
One thing we continue to see, from a legal and business perspective, is that people are looking to stay responsive and flexible as different needs arise. So I think flexibility will be key in every way. Lawyers need to be prepared to negotiate options that allow for spaces to contract or expand, landlords need to be prepared to offer amenities and services responsive to tenants’ needs, and businesses need to be prepared to be flexible as they welcome their employees back and figure out what combination of in-person and remote work will provide them with a sustainable future.
On the food and retail side of the leasing world, there is an eagerness to see revitalization fueled by a combination of the return to office work and the end of pandemic-based restrictions. We’ve seen restaurants, in particular, pursuing new leases, although clauses have been added into many such leases outlining a course of action in the event of another pandemic, taking into account how landlords and tenants will share the risks and financial burdens of any future shutdowns or reductions in seating capacity due to health emergencies, using the lessons learned from the COVID-19 pandemic.
Hopefully, more than anything else, this experience has highlighted and enhanced the industry’s resilience. Anyone who has tried to predict how the pandemic and post-pandemic worlds would play out has been proven wrong in at least some measure, so we need to bring a bit of humility to our approach to the new normal, along with confidence that we will continue to emerge successfully.
What makes your practice unique?
Our practice is unique in that we have a group of lawyers with decades of experience and a fantastic client roster that includes a wide variety of landlords and tenants. We represent more than 40 buildings in New York City alone on the side of landlords, ranging from large public companies to small family offices, and on the tenant side, we work both with companies that are household names with regional, national and international leasing portfolios as well as with smaller companies that may have as few as one or two offices, stores or restaurants.
Being present in the market negotiating leases of all sizes in all classes of buildings from all client perspectives on a day-to-day basis year after year allows us to offer a great deal of perspective and the ability to help clients navigate and think through challenging situations that require creativity and flexibility. We understand what landlords need to achieve in order to create thriving buildings and what tenants need to achieve in order to establish workplaces that fit their needs and complement their business plans.
What makes Loeb & Loeb a leader in the industry?
The Commercial Real Estate Leasing practice at Loeb & Loeb is widely acknowledged as an industry leader due primarily to its reputation for pragmatic, nimble and effective negotiations and highly responsive client service. Members of the practice are deeply experienced commercial leasing industry practitioners and advisers to both landlords and tenants at some of the country’s most prestigious properties. Loeb’s focus on leasing, subleasing and brokerage transactions extends coast to coast to major cities across the U.S.
Loeb handles virtually all types of commercial leases and subleases for uses including office and retail spaces, restaurants, fitness centers, recreational facilities, museums, public buildings, libraries, schools, warehouses and distribution sites, and hospitality and industrial facilities. We routinely work with clients across a wide range of industry sectors involved in commercial real estate leasing, including landlords, financial services providers, technology companies, professional services firms, nonprofits, restaurants, hospitality providers, food service companies, retailers and medical facilities. Extensive day-to-day engagement from both sides of the table allows us to problem solve in ways that work for both landlords and tenants—whether addressing technical issues or negotiating optionality.
At our practice’s core are more than a dozen lawyers dedicated to commercial real estate leasing, many of whom have worked together for more than 20 years. The years of experience that the team brings to the table, resulting in extensive lessons learned from working in various market conditions, allow us to navigate challenging situations, such as the disruption caused by the COVID-19 pandemic, with informed practicality that helps guide clients toward sustainable and effective solutions.
Nichole practices in the area of commercial real estate law, concentrating on the representation of both landlords and tenants in office and retail leasing and subleasing. In addition, she has a wide range of experience in related matters, including commercial real estate sales and acquisitions, real estate brokerage and agency agreements, and the assessment of the real estate aspects of mergers and acquisitions.
Commercial real estate leasing has changed significantly over the past two years due to the pandemic. How has the industry rebounded, and what major trends are you watching in this space?
As we emerge from the pandemic, there is a feeling of hopefulness within the industry, both in New York City and across the country. We are excited to see some vibrancy coming back to New York as more and more companies are looking to reconvene in person, even if that’s on a hybrid basis, which may become a long-term reality for a lot of businesses.
One positive trend we’re starting to see is that more companies are willing to make commitments to long-term leases rather than being hesitant to commit to space or looking to shrink their footprints, which we frequently saw during the height of the pandemic. We’ve seen the most robust response in Class A office buildings, continuing a trend that has followed prior downturns where there has been a “flight to quality,” and the buildings with the most to offer have rebounded more quickly than others. Other properties are engaging tenants by offering shorter-term leases with creative options to renew, expand and contract in an effort to provide flexibility. In all cases, landlords who have been willing to invest in creating community amenities and placemaking—creating places that tenants and their employees want to come back to—are finding that those investments have served them well. Many landlords have also worked to lure tenants back by installing robust safety measures, such as advanced air filtration systems, and committing to enhanced cleaning protocols. We hope to see these positive trends continue as we collectively explore what the new normal will bring to the industry.
What’s the one development in this space that you think is going to have the biggest impact in the next three to five years?
Over the next three to five years, it will be interesting to see whether companies make changes concerning the amount of office space they’re using and the ways in which they use it, particularly if hybrid work becomes the norm. Perhaps counterintuitively, I’m not sure if hybrid work schedules will profoundly change physical office space needs, despite having a variety of impacts on the work environment. In light of recent health and safety concerns due to COVID-19, employees may want to use at least the same amount of physical space as they had pre-pandemic, especially where they were accustomed to individual offices. On the other hand, it’s possible we may see businesses grapple with how to share the same space among several employees, for example, by figuring out how workers can share an office using alternate-day hybrid work schedules. I think this will become a sort of experiment for companies, and it will be intriguing to see how it plays out—and how it impacts companies’ leasing needs.
One thing we continue to see, from a legal and business perspective, is that people are looking to stay responsive and flexible as different needs arise. So I think flexibility will be key in every way. Lawyers need to be prepared to negotiate options that allow for spaces to contract or expand, landlords need to be prepared to offer amenities and services responsive to tenants’ needs, and businesses need to be prepared to be flexible as they welcome their employees back and figure out what combination of in-person and remote work will provide them with a sustainable future.
On the food and retail side of the leasing world, there is an eagerness to see revitalization fueled by a combination of the return to office work and the end of pandemic-based restrictions. We’ve seen restaurants, in particular, pursuing new leases, although clauses have been added into many such leases outlining a course of action in the event of another pandemic, taking into account how landlords and tenants will share the risks and financial burdens of any future shutdowns or reductions in seating capacity due to health emergencies, using the lessons learned from the COVID-19 pandemic.
Hopefully, more than anything else, this experience has highlighted and enhanced the industry’s resilience. Anyone who has tried to predict how the pandemic and post-pandemic worlds would play out has been proven wrong in at least some measure, so we need to bring a bit of humility to our approach to the new normal, along with confidence that we will continue to emerge successfully.
What makes your practice unique?
Our practice is unique in that we have a group of lawyers with decades of experience and a fantastic client roster that includes a wide variety of landlords and tenants. We represent more than 40 buildings in New York City alone on the side of landlords, ranging from large public companies to small family offices, and on the tenant side, we work both with companies that are household names with regional, national and international leasing portfolios as well as with smaller companies that may have as few as one or two offices, stores or restaurants.
Being present in the market negotiating leases of all sizes in all classes of buildings from all client perspectives on a day-to-day basis year after year allows us to offer a great deal of perspective and the ability to help clients navigate and think through challenging situations that require creativity and flexibility. We understand what landlords need to achieve in order to create thriving buildings and what tenants need to achieve in order to establish workplaces that fit their needs and complement their business plans.
What makes Loeb & Loeb a leader in the industry?
The Commercial Real Estate Leasing practice at Loeb & Loeb is widely acknowledged as an industry leader due primarily to its reputation for pragmatic, nimble and effective negotiations and highly responsive client service. Members of the practice are deeply experienced commercial leasing industry practitioners and advisers to both landlords and tenants at some of the country’s most prestigious properties. Loeb’s focus on leasing, subleasing and brokerage transactions extends coast to coast to major cities across the U.S.
Loeb handles virtually all types of commercial leases and subleases for uses including office and retail spaces, restaurants, fitness centers, recreational facilities, museums, public buildings, libraries, schools, warehouses and distribution sites, and hospitality and industrial facilities. We routinely work with clients across a wide range of industry sectors involved in commercial real estate leasing, including landlords, financial services providers, technology companies, professional services firms, nonprofits, restaurants, hospitality providers, food service companies, retailers and medical facilities. Extensive day-to-day engagement from both sides of the table allows us to problem solve in ways that work for both landlords and tenants—whether addressing technical issues or negotiating optionality.
At our practice’s core are more than a dozen lawyers dedicated to commercial real estate leasing, many of whom have worked together for more than 20 years. The years of experience that the team brings to the table, resulting in extensive lessons learned from working in various market conditions, allow us to navigate challenging situations, such as the disruption caused by the COVID-19 pandemic, with informed practicality that helps guide clients toward sustainable and effective solutions.
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Chair, Commercial Real Estate Leasing