Leasing In An Oversupplied Market

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Today we’re talking about leasing strategy for new buildings in a market that is over-supplied.

This is a topic that matters a great deal right now, because in many markets, especially where there’s been a wave of new Class A deliveries, the challenge is no longer simply getting the building built. The challenge is getting it leased without destroying the economics of the project.

When markets become over-supplied, a lot of owners make the same mistake. They become emotionally attached to their pro forma rent. They want to defend the number on the spreadsheet, even when the market has already moved on.

In an over-supplied market, the first objective is not to maximize rent. The first objective is to maximize occupancy. That may sound counterintuitive, especially if you’ve just delivered a shiny new asset with premium finishes, nice amenities, and a construction loan that doesn’t care about your excuses. But it’s the truth.

A vacant unit is the most expensive unit in the building.

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