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Sweet Deals on Office Rents Turn Sour Later

January 20, 1991

Tenants who are cutting sweet deals because of the current oversupply of office space in Southern California, "High Vacancy Rates Lead to Sweet Deals for Office Tenants" (Dec. 24), should enter these agreements with a financial caveat.

The soft rental market and a lack of financing are resulting in far fewer new office building projects, and during the next several years a space shortage will occur with resulting higher rents.

Firms renting space today at artificially low rents brought on by the office glut should be ready to renew their leases, or take new space five years from now, at far higher rents brought on by the coming space shortage. Perhaps they should even set aside the estimated difference in rent they are paying today to offset the rent they will be paying at renewal.

In 1979-80, five years after tenants cut sweet deals during the office glut and recession of 1973-74, these same firms were crying price gouging when office building owners sought market-level rents when it was time for leases to be renewed.

MARTIN A. BROWER

Newport Beach

The writer is editor and publisher of "Martin Brower's Orange County Report," a business newsletter.

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