Are Business actively looking for space to lease? Here’s what search behavior is telling us.
We’ve covered the effects of the COVID-19 crisis, economic effects and subsequent reduction in leasing volumes, extensively here at Otso. Since many of our customers (or front-lines to our customers) are leasing agents we wanted to find out how, why and if businesses and decision-makers are still searching for space.
As is widely known, whether a brokerage professional ends up being involved or not, 90%+ of commercial lease searches begin online. It’s natural for a consumer in today’s environment to fire up their mobile phone or computer and tap into the power of the world’s search engine.
Commercial real estate brokers and listing services know this. They spend an enormous amount of money ($7 Billion!) annually to try and capture these searchers interest. So what about the search traffic? What are the prospects, or “searchers” and “occupiers” of commercial real estate looking for since COVID-19? Well, the data is pretty interesting.
The #1 Burning Question for Commercial Real Estate Stakeholders: Are Businesses Still Searching for Space?
Well, the answer is complicated. Let’s start with what businesses and consumers “normally” do when searching for space. The most popular search terms when searching for commercial lease space are:
|Keyword||Avg. monthly searches|
|office space rental||33,100|
|office space for rent near me||14,800|
|commercial property for lease||12,100|
|commercial space for rent||12,100|
|office for rent||12,100|
|rent commercial property||8,100|
|retail space for lease||6,600|
|retail space for rent||5,400|
|shops for rent near me||5,400|
|restaurant for lease||4,400|
|warehouse for lease||2,900|
|property for lease||1,600|
|retail space for lease near me||1,600|
Credit: Google Keyword Planner
And yes, we’re not kidding. The term “Loopnet” dominates search traffic by 10X vs. the next best term in keyword planning. That’s right, Loopnet get searches for its own name 1,000% more than a common search term for the industry. This is why their pricing has gone up so much (a story for another day) because they see almost every potential searcher of space come across their website.
However, let’s focus on the keyword “for lease” and variables around it. On a rolling 12 month basis it’s interesting to see that office search greatly outweighs both retail and industrial searches nationally. This makes sense because the majority of commercial space is office. Seeing 3-4X search volumes puts these numbers in a real context.
Now, let’s start diving into the last 90 days or so.
How does a popular term and variants of “Commercial Lease” look like?
With 100 being the maximum volume available to search, it looks like on an average basis we’re seeing roughly 60% of the traffic we would normally see for “commercial lease.”
How about “Office Lease?” and associated variants?
But it’s not ALL about office, let’s try “Retail space for Lease” and some combinations Looks to be down to less than 50% of what we normally see…
And let’s not leave out the industrial folks…”Industrial Space for Lease” has less data, but down more than 50% on average as well.
So across the board, all popular searches for commercial space and leasing are down significantly. This is to be expected. Let’s dive a little deeper though.
What are some variables people are adding to search terms like commercial lease?
Here’s a few surprising ones:
YES. “Force Majure”, “Bankruptcy” and “Damages” are all spiking in search volume.
How much is a spike? Well Google defines it as a “Breakout” meaning the term search volume grew by more than 5,000%. Yep, so not only is the search for space way down. The search for options to “get out” of a lease are way up.
None of this can be viewed as a vacuum. However, we thought the data was very interesting. If you ask the brokerage community, sentiment is pretty consistent across all property classes. They are expecting significant reduction in leasing volume for the next 12 months as well as attrition in the ranks of the professionals.
So what does this tell us about the current state of the market for leasing commercial space?
- Leasing volumes are down because people are not looking for space to lease at an exponentially lower rate, online.
- Existing leases are at great risk for default if we are to believe these search numbers. Force majeure claims are likely to be heavily invoked and litigated across all sectors of commercial property but especially retail.
- Practical solutions are necessary. Relief from lenders, subsequent relief from Landlords and finally relief directly to Tenants is very top of mind and essential to potentially avoiding a massive wave of defaults.
- There is HOPE! Predictions from many economists suggest that after Q2’s worst quarter of economic activity in modern history, Q3/Q4 could be the greatest rebound in history.
We encourage brokerage professionals, landlords, businesses and associated legal counsels to hop on a call and look at creative ways to stem the tide until we get some normalcy back in our lives.
One thing is absolutely certain. After all of this starts to settle down businesses will face severe headwinds, cash on hand issues and slower sales until consumers feel good about transacting and gathering again. Who knows how long this will take?
However, there is hope! Entrepreneurship and small businesses borne out of a crisis are uniquely positioned to succeed as things turn around. We’re confident that this spirit has not been lost. Hang in there folks and if you’re a stakeholder in the industry now is the perfect time to consider new solutions to attract, retain and support tenants in your commercial properties.
We hope this has been helpful to you. As always, Otso is here to facilitate better lease experiences and coverage for both Tenant and Landlord in a lease. If we can help your business or portfolio through our industry-first AA-rated Guarantees please contact us anytime.