What Tenants Want: 4 Companies On What Drove Their Office Leasing Decisions This Year

Office tenants in search of new space know what they want, and they are leveraging today’s market conditions to get exactly that.

Five years after the start of the pandemic, many tenants have enacted policies to bring their employees back to the office and are increasingly making long-term leasing decisions. More than 54M SF of office leases closed during the first quarter, according to CBRE, up 18% from last year. 

The factors driving those leases have evolved as corporate real estate decision-makers prioritize questions like: How long will the commute be for employees? How vibrant is the neighborhood around the building? How new are the amenity spaces?

As they seek space that answers those questions favorably, tenants are finding they have the upper hand, with many markets experiencing record-high vacancy rates and landlords investing in upgrades to fill their spaces. The nationwide office vacancy rate stood at 19% last quarter, and average tenant improvement allowances reached $87.51 per SF last year, up from $67.37 in 2019.

Four companies that have signed leases this year spoke to Bisnow about what factors influenced their decisions and how they leveraged a tenant-favorable market to get the best deal. These tenants — including law firms, tech companies and financial institutions — signed a variety of deals from expanding an existing office to backfilling a recently vacated space to preleasing a new high-end development.

"This is all driven by the fact that we are all pushing to get people back into the office for the right reasons," said Siemens Energy’s Matt Neal, whose firm signed a full-building lease in Raleigh, North Carolina. "The flexibility that the owners show is better because we're kind of in this together, trying to get people back in and create the culture that we're trying to create."

If They Build It, We Will Come

McDermott Will & Emery couldn't find existing office space that fit its needs in Washington, D.C., so it decided to find someone to build it.

Linda Mangini, the firm’s chief of administration, said the company was looking to relocate from its 185K SF at 500 North Capitol St. NW, an office it has occupied since 2012. The company found the surrounding neighborhood to be lacking.

"Our lease was coming up, and I probably reviewed every single building in the D.C. market that was built. 'Is this a possibility for McDermott?'" Mangini said.

She said none of the city's office buildings caught her eye, so her team began looking at development sites in hopes that they could build a new office.

Mangini said they stumbled upon 725 12th St. NW, a 1990s-era office building previously envisioned for a "live/work" conversion, and the team began talking about it with BXP, the company's landlord at its existing space.

"We were thinking, 'Gee, could a building be developed here?'" she said. "[BXP] ended up negotiating a deal that made sense economically to purchase the site, purchase what is there and actually commit to a new building. That was pretty exciting for us."

The REIT acquired the property at the end of 2024 for $34M from Hines with plans to demolish the 300K SF existing building and replace it with a 320K SF trophy office building. The law firm signed a 150K SF prelease in January to take the top five floors in the new building.

Now, after landing another 126K SF law firm in April, the building is 87% preleased before even starting construction.

Mangini said McDermott wanted upper-floor space with nice amenities, easy access to the Metro and a vibrant neighborhood. The office is 35K SF smaller than its space on North Capitol Street, but Mangini said the firm was able to design the new space in a way that allowed it to downsize.

"We're building a space for how we work today," she said. "You might be paying more money per square foot, but you are also cutting the amount of space you're paying for, so it becomes very economic."

'The Iconic Building Of San Francisco's Skyline'

Law firm Morgan Lewis was drawn to the idea of being in one of the most recognizable buildings in San Francisco.

The Transamerica Pyramid, the 48-story tower at 600 Montgomery St., underwent $400M in renovations after New York-based Shvo acquired it in 2020.

The renovations to the 53-year-old building were a big draw for Morgan Lewis, according to Managing Partner Brent Hawkins.

"The Pyramid is the iconic building of San Francisco's skyline," Hawkins said. "It represented the kind of feel, substance and innovation that we were looking for."

The firm in March signed the building’s largest lease since the renovations launched, taking 123K SF across seven floors. It plans to relocate next year.

Its office has been in 150K SF at One Market Plaza on the city's Embarcadero for the past two decades. Hawkins said it was a difficult choice to leave its longtime home, but it likes the feel of its new location, with many nearby restaurants, cafés and bars.

"It's kind of the hip, revitalized neighborhood that's critically important to us," he said. 

Morgan Lewis also liked the building's amenities, including a top-floor sky bar and lounge and a wellness center.

The 500K SF office building has surpassed 80% occupancy, attracting new tenants including Northwestern Mutual, law firm BakerHostetler and Sterling Bank.

In 2023, Shvo CEO Michael Shvo told Bisnow he was signing leases for $200 per SF, more than triple the city's average asking rate. Hawkins said he couldn't comment on the deal's financials, but he said the firm negotiated "things that were favorable."

'Timing And Luck'

Massachusetts-based financial institution Rockland Trust didn't want to be headquartered in a busy commercial district like Boston. It wanted to stay in the state's South Shore, where it had been based for more than a century.

Earlier this month, the institution signed a 140K SF lease in Rockland after five years of waiting for an attractive space to come online. The firm will consolidate its headquarters and four other corporate locations nearby into the new space.

Rockland Trust Director of Corporate Services Stephen Carroll said the firm had been eyeing a relocation since before the pandemic, but due to the scarcity of prime office space in the South Shore, the search took longer than expected.

"There are not a lot of buildings that fall into that availability requirement," Carroll said.

Eventually, the firm saw that EMD Serono vacated its longtime space at A.W. Perry's 200K SF One Technology Place in Rockland for a new office in the Seaport District last year.

"Like a lot of things in real estate, it's sort of timing and luck," Carroll said. "As soon as we found out, we immediately reached out to the owner and started investigating the building."

This was the perfect scenario for the firm, Carroll said, as it wanted to stay in the town so its roughly 500 workers wouldn’t have longer commute times. The firm signed a nearly full-building lease.

Carroll said the move was also partially based on today’s tenant-friendly market. He said the company secured a period of free rent and a tenant improvement package, but he didn't disclose the specifics other than that the deal was "favorable for us."

"Absolutely," Carroll said when asked if the market favors tenants. "We were looking in times when the market was in favor of the landlord. It sort of shifts. It just happened that we timed it appropriately there."

Flexibility Is Key

Energy technology company Siemens Energy has been expanding its operations and hiring in Raleigh, leading it to sign a full-building lease at 540 Tech Center in January.

The 55K SF lease represented a doubling from its previous footprint in the building.

Neal, the firm’s vice president of grid solutions, said the lease comes amid "hypergrowth" for the company. Siemens Energy announced in 2024 that it was looking to hire more than 500 employees in Raleigh and Charlotte as part of its $150M investment in the state.

"We're hiring a lot of people. We are growing our teams," Neal said. "The business is doing well, and with that, we've needed this additional space."

Neal said the biggest driver has been the ability to expand in its current building and work with landlord Milena USA to build out the space the company needs. The company has introduced a hybrid work policy with three days a week for staff and four days a week for management.

The company has been in the building for the last two decades. The location isn't the firm's corporate headquarters, but it is one of the company’s largest offices and includes roughly 17K SF of lab space.

Neal said the firm decided to stay in the area because the office offered the flexibility to grow and build out the space it wanted. Neal also said the area is an attractive market for new hires from the Research Triangle, local universities and the growing population.

The landlord completed several renovations to the property, including parking lot upgrades, landscape improvements and new signage. The company is set to occupy the new space in July. 

"Part of the reason we stay here is because we can entice people to move to Raleigh because it's a good location. It's a Google quality of life," Neal said. "It's not a hard place to convince people to come to either domestically or internationally, and it's a very technical community."