Key findings of the report include:
- Speculative office suites have become increasingly popular in the Washington metro area. Notably, the number of spec suites available in the CBD and East End submarkets of the District of Columbia has more than doubled in the past 18 months.
- Spec suites lease up considerably more quickly than space that is not built out: 3.4 months on average, compared with 16.5 months for customized space.
- The added flexibility and shorter lease terms that come with spec suites allows owners to charge a premium, with average achieved rents 10-20% higher for spec suites than for customized space.
- Buildout costs for an office owner tend to be similar between spec suites and customized space, but since rents are higher and time on market is shorter, it makes sense from an owner’s perspective to build spec suites. Owners do bear some risk in building out spec suites, however, as the upfront costs will not be recouped if the space never leases. Meanwhile, spec suites are a great option for tenants who need move-in-ready space and are willing to pay a premium for shorter, more flexible lease terms.
This study concludes with implications for both owners and tenants in light of these findings.