Office Archives - REBusinessOnline

How Office Owners Can Navigate Challenging Credit Scenarios for Their Properties

Taylor Williams — Wed, 13 Dec 2023 12:49:00 +0000

By Nicole Schmidt, managing partner, Oberon Securities Whether it’s traditional bank loans, private equity or securitized financings, it’s clear that a large number of commercial property owners are facing serious credit issues. Many office tenants continued making rent payments even through COVID-19, and the work from home trend has now left them with excess space. But as leases expire, they are downsizing their physical footprints, leaving landlords with significant vacancies amid very soft demand. According to a November 2023 article in The Wall Street Journal, “Only one out of every three securitized office mortgages that expired during the first nine months of 2023 was paid off by the end of September, according to Moody’s Analytics. That is the smallest share for the first nine months of any year since at least 2008 and well below the nadir reached in 2009, when 47 percent of these loans got paid off.” Add to that the impact of WeWork’s recent bankruptcy filing and projected high office vacancy rates in New York City and other major markets — plus higher interest rates — and the inevitable result is lower valuations that don’t support existing levels of debt on many properties. Higher vacancy rates, higher…

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Office-to-Multifamily Conversions Are Reshaping Downtown Dallas

Taylor Williams — Wed, 13 Sep 2023 11:40:00 +0000

By Ryan Kimura, senior vice president of strategic partnerships, Premier The changing landscape of work and the future of the office remains in flux, leading to a reduced demand for office space in major metropolitan areas throughout the country. This shift has rendered many office buildings underutilized and obsolete, prompting developers and investors to seek alternative uses for these structures. Simultaneously, urbanization continues to grow, fueling the demand for housing and a need for innovative multifamily solutions. Office-to-multifamily conversions provide an answer to both challenges, repurposing office spaces into much-needed residential units while allowing investors to capitalize on demand. This perfect storm of reduced office demand, increased housing needs and favorable regulatory conditions has driven the popularity of office-to-multifamily conversions, positioning them as a sustainable strategy for urban development. These conversions began to surge in popular metro areas during the height of the pandemic as uncertainty surrounded the return to the workplace. Fast forward three years later and office conversions are still booming — especially in the Dallas market. The region, which has witnessed some of the largest population increase in the country over the past five years, has also had a double-digit office vacancy rate in its downtown area…

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Six Ways in Which Office Users Can Increase Efficiency of Space Usage

Taylor Williams — Mon, 22 May 2023 12:00:00 +0000

By Wes Snow, co-founder and CEO, Ascendix Technologies For the first time since the COVID-19 pandemic began, offices are 50 percent occupied nationally as companies push harder for returns to their buildings — which is good news. Still, amid this encouraging development, inflation, interest rate hikes and general fears of recession might impede businesses planning to align their office rent expenses with the pre-pandemic rates. Can businesses optimize the space they’re already utilizing without renting more? At Ascendix Technologies, a company that has been specializing in custom real estate software development for two decades, we’ve seen a variety of space extension practices applied by office owners and managers. Here are some methods that users can employ too maximize efficiency within their existing footprints. Implement Open Floor Plans Not only do wall-less spaces encourage collaboration among teams and reduce the need for spacious individual offices, they also increase flexibility in terms of how space is utilized. Reconfiguring spaces is easy with movable walls and modular furniture and represents an option that helps growing businesses align their changing needs with the spaces they’ve got. Upgrading open-floor space management with automation is another viable option. With a technology like floor management software or…

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Texas Office Owners Shift Priorities from Maximizing Rent to Showcasing Occupancy, Vibrancy

Taylor Williams — Wed, 26 Apr 2023 12:00:00 +0000

By Taylor Williams Office owners have spent the last two-plus years undertaking every creative measure they can fathom — and afford — to get tenants and their employees to legitimately want to come back to their buildings. From investing in upgrades to physical amenities to hiring hospitality-minded professionals for property activation to offering personalized incentives, nothing has been out of bounds when it comes to recouping occupancy. Enough time has now passed such that owners can judge the extent to which their ideas and initiatives have worked. Of course, the goalposts for what defines success in the office sector have shifted radically during that time. Profit margins and forecasts have shrunk as 60 to 70 percent occupancy three to four days a week now starts to look pretty good, all other factors being held equal. It’s simply a different world. “We are never going back to pre-pandemic ways,” says Ami Figg, senior leasing specialist at Houston-based Hartman. “What COVID-19 has done for the office market is equivalent to what September 11 did for the travel industry. There will always be a need for traditional office space, but it’s changed forever, so it’s upon us as landlord and tenant reps to…

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Driving Factors Reshaping the Suburban Chicago Office Market

Kristin Harlow — Thu, 09 Mar 2023 12:45:17 +0000

By Jennifer Hopkins, MBA and Olivia Czyzynski, SVN Chicago Commercial The commercial real estate (CRE) industry has traditionally been relatively stable but can be impacted by the economy with normal ups and downs based on economic fluctuations. However, when COVID-19 hit, it was unprecedented and something the world had not seen in many years. The CRE industry started preparing for the changes that came along, including business shutdowns and many employees working from home. Although it was expected that the retail market would be the hardest hit sector, it turned out that the office market ended up being significantly impacted. The overall issues and pending work-from-home approach have had a major ripple effect on office markets across the nation. The Chicagoland market was impacted particularly hard, and this included the suburban Chicago markets. Chicagoland is broken out into several main commercial hubs: the city of Chicago, the East-West Corridor, the O’Hare market, the Northwest suburbs and the North suburbs. According to CoStar, office vacancy rates increased in all these markets. In 2020, the vacancy rates ranged from 7 to 20 percent, but currently stand at 18.8 percent, 17.3 percent, 16.9 percent, 23.2 percent and 11 percent, respectively. While no market…

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Is the Motor City Office Market Idling or Roaring?

Kristin Harlow — Thu, 09 Feb 2023 12:45:57 +0000

By Andy Gutman, Farbman Group It’s no secret that the last few years have been a turbulent time for the office market nationally. While Detroit has fared somewhat better than some other cities across the Midwest, the same pandemic (and now post-pandemic) pressures have led to a higher-than-usual degree of uncertainty and volatility. Here in the early part of 2023, it’s a good time to take a step back and look at how the Detroit office landscape is changing, how it’s not changing and what might be in store throughout the rest of the year — and beyond. This is a unique time because there’s still a tremendous amount of uncertainty to factor into the commercial real estate market in general, and into office specifically. There are a lot of brands and businesses who either have not made up their mind about their office structure and needs going forward, or are still in an experimental post-pandemic period where they are trying to figure out the balance that works for them in terms of remote or hybrid work options and brick-and-mortar configurations. Until more of that uncertainty is resolved, a clear picture of the medium- and long-term prospects for the office…

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In St. Louis’ Post-Pandemic Office Market, Quality Is Key

Kristin Harlow — Thu, 19 Jan 2023 12:45:51 +0000

By Artie Kerckhoff and Joshua Allen, CBRE For businesses, the conversation around the return to office has shifted. Most companies find themselves considering how to entice workers back instead of when to call them back. It’s an interesting dynamic, born out of stopgap remote-working policies and catalyzed by an employee’s market. Where does this leave the St. Louis office market? The metro’s overall office vacancy rate remained steady at 12.9 percent at the end of the third quarter. Yet, leasing velocity has shown significant improvement with leases signed at newly constructed buildings like Forsyth Pointe & Commerce Tower in Clayton and Edge@West in Creve Coeur. In addition, a handful of tenants have signed new leases at existing prime Class A, amenity-rich buildings such as Centene Plaza C Building, The Plaza in Clayton and Shaw Park Plaza. The reason for this uptick is a trend that’s playing out in St. Louis and across the country: an overall flight to quality. Prime at a premium At the onset of the pandemic, office users signed short-term extensions and took a wait-and-see approach to get through the immediate crisis. Now, as those extensions expire, they’re migrating to prime Class A office space with collaborative,…

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The Two Most Likely Outcomes for New Jersey’s Suburban Office Parks

Taylor Williams — Wed, 21 Dec 2022 12:46:35 +0000

By Ken Colao, president and CEO, CNY Group Whether you’re on the Jersey Parkway or the Turnpike, you’ve undoubtedly driven past commercial buildings and office parks that have stood in the Garden State for decades. But the age of many of these structures is starting to cause problems. Earlier this year, JLL released a report in which the real estate firm estimated that 57 percent of suburban office space nationwide is old enough to be considered functionally obsolete. In New Jersey, specifically, that figure rises to 72 percent, among the highest in the nation. Based on two decades worth of construction experience in New Jersey and New York, CNY Group believes the two most likely outcomes for these structures involve upgrades to true Class A offices or conversion to life sciences facilities. Keeping Offices Intact With a growing number of people migrating out of urban cores, suburban office developers are revitalizing their properties to attract new tenants. When employees began moving away from city centers, employers didn’t particularly follow them, but that trend could change. Businesses will decrease their real estate footprints in urban areas unless costs of occupancy are reduced, safety is maintained and environmental standards and practices are…

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Texas Office Users Trade Lengthier Terms for Tenant Improvement Dollars

Taylor Williams — Tue, 06 Dec 2022 12:48:28 +0000

By Taylor Williams Success in today’s office sector is all about creating incentives. Some companies, from small professional services outfits to tech giants like Salesforce and Airbnb, have completely capitulated to remote work and have aggressively slashed their office footprints. Others remain dogged in their commitments to nonresidential (and nonretail) workspaces. What works for one company may not work for its competitors, and there remains a fundamental need for at least some traditional office space across all major markets. Against this backdrop, what separates the winners from the losers is the ability to create a draw, to give people legitimately good reasons to get up earlier, spend more time getting ready, endure traffic, put costly mileage on their cars, then deal with whatever quirky goings-on define their office experience. Needless to say, this can be a tough sell, especially for employees with families and suburban commutes. Which is why owners, both of businesses and of the office buildings that house them, are getting creative. These corporate leaders and landlords are working in tandem to ensure that the spaces meet the precise needs of their workforces, from design and layout within the suite to access to onsite amenities and surrounding retail,…

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Texas Holiday Sales Outlook: Not Very Merry

Taylor Williams — Tue, 29 Nov 2022 12:51:45 +0000

By Jason Baker of Baker Katz It’s amazing how quickly things can change. Just a few short months ago, the commercial real estate outlook was generally positive. Both in Texas and nationally, retail sales were proving to be fairly resilient to the rising inflation and economic turbulence that have characterized most of 2022. Despite low consumer confidence, strong fundamentals and a retail sector riding the high of a post-pandemic boom provided plenty of reasons for optimism. That has all changed in the last 60 to 90 days. Prevailing positivity has recently given way to concern, and sentiment from within the industry has clearly shifted. High interest rates have made it virtually impossible to develop any type of commercial project, and persistent supply chain constraints and ongoing hikes in costs of construction materials have further exacerbated this challenge. With interest rate increases come higher cap rates, which complicates sellers’ efforts to move their assets while values are this fluid. To put the impact of rising rates into perspective, interest payments on commercial real estate have in some cases increased five-fold in just the last few months. The impact of this activity on retail real estate during the all-important holiday shopping season…

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Houston Office Market Continues Forward Slog

Taylor Williams — Tue, 22 Nov 2022 12:58:44 +0000

By Chip Colvill, executive vice president, Cushman & Wakefield Like many U.S. cities in the post-pandemic world, Houston’s office sector faces a long road to recovery. Historically, office demand follows office job creation — and job growth has been a bright spot of the Houston economy in 2022. Unfortunately, the U.S. economy seems to be slowing, and the outlook remains highly uncertain. Odds of a recession have risen; inflation and wage pressures remain elevated, and higher interest rates are impacting various parts of the economy, including commercial real estate. Throughout the United States as well as in Houston, the correlation between job growth and office demand is tenuous, given that many businesses are still recalibrating workplace strategies to allow remote and hybrid work schedules. However, new jobs — even more flexible, hybrid jobs — will necessitate various types of workspaces, including demand for office and flexible office space. Newer office buildings across Houston have thrived despite the market’s elevated Class A vacancy rate of approximately 26 percent. Each new quarter of data continues to confirm the flight-to-quality trend and the existence of a bifurcated office sector between older and newer office product. Higher-quality and newer office space is dominating as…

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Five Factors Defining the Grand Rapids Office Market

Kristin Harlow — Thu, 10 Nov 2022 12:45:59 +0000

By Jeff Karger, JLL There’s no doubt that the office market today is much different than what it was five years ago. Employers across the nation have had to adjust their work models, time and time again, to meet the needs of their employees — and those in Grand Rapids are no exception. As landlords, employers and employees adapt to these changes, it’s important to understand the direction of the office market. Below, check out five factors that are defining it. 1. A flight to quality Like many other cities across the nation, Grand Rapids is experiencing a resounding flight to quality. Employers are seeking Class A and trophy spaces to appeal to their employees and offer them an experience, rather than just a cubicle to work in. Some of these office features can include free fitness centers, onsite cafés, coffee shops and restaurants, outdoor terraces and more. Plus, according to JLL research, 59 percent of employees expect to work at a company that supports their health and well-being. Interestingly enough, employees prioritize this over salary — a key reason why companies and landlords alike are investing in amenitized spaces with up-to-date HVAC systems, exercise classes and healthy food options.…

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Three Indicators of a Rebounding Office Market in Indianapolis

Kristin Harlow — Thu, 20 Oct 2022 11:45:58 +0000

By Traci Kapsalis, JLL It’s no secret that the COVID-19 pandemic turned every office market across the globe upside down. In the process, quality of life, health and well-being have become top priorities for office workers, as well as a push for hybrid and flexible working models. To understand and support these evolving expectations, local governments, employers and landlords are working together to identify and shape their new future of work. In fact, new research from JLL reports that the next three years will be a critical phase for commercial real estate strategy, representing a crucial window of opportunity that will determine how successful companies (and cities) will be in adapting to rapid changes. At the crossroads of America, the Indianapolis market is well on its way to a reimagined office environment. Here are three demonstrable signs. 1. Flight to quality dominates the office market Leasing activity for Class A office properties is strong in Indianapolis. According to a recent report, activity in this sector is reaching new heights as it achieved 248,000 square feet of occupancy growth in the second quarter — the highest in a single quarter in over four years — and hit record-high rents of almost…

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As Uncertainty Continues in Office Market, What Should Tenants Do?

Kristin Harlow — Thu, 06 Oct 2022 11:45:41 +0000

By Ryan Foran, Cresa As we approach the three-year anniversary of the start of the pandemic, it continues to affect the commercial real estate industry in many ways, with no asset class impacted as significantly as the office sector. While retail initially stumbled but rebounded, and industrial soared to unexpected heights amid distribution emergencies, millions of U.S. office employees continue a tenuous balance of working from home versus going into the office. The pandemic wasn’t all bad news for office tenants. Many businesses with simple infrastructure and experienced staff have been so effective with remote set-ups that they have shed office space permanently and eliminated rent from the books. Others have embraced emerging technologies like virtual meetings and chat solutions to reduce the need for face-to-face interaction. In one way or another, most businesses were able to leverage this unique situation to improve their business processes, technology and personnel, and have embraced remote work at some level. But many businesses with younger, less experienced staff have reported ongoing struggles with recruiting, mentorship, culture development and staff retention. Some of these may have been amplified by complex external factors such as an ongoing labor shortage, an unprecedented resignation of our older…

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Demographic Trends Point to Strong Recovery for Texas Office Markets

Taylor Williams — Wed, 21 Sep 2022 11:22:45 +0000

By Brett Merz, senior vice president, KBS Texas continues to be a top state for job and population growth as its low cost of living and business-friendly policies attract companies and residents from other parts of the country. As such, many commercial real estate owners and operators are recognizing the state’s potential for increased leasing activity in the second half of 2022 and throughout 2023. The portfolio of KBS, which has long been investing in these markets, currently contains 16 office assets in these cities, and we continue to evaluate opportunities to acquire more that align with our investment strategy. Based on 30 years of experience in acquiring and operating premier office assets throughout Texas and beyond, here are a few trends we anticipate continuing for the remainder of 2022 and into next year. Rising In-Migration Major Texas markets including Austin, Dallas-Fort Worth (DFW), Houston and San Antonio are likely to remain magnets for in-migration. Residents are moving to these markets in search of a more affordable quality of life, which is aided by the absence of a state income tax. In addition, companies are seeking office space in a region with business-friendly tax policies. Austin, in particular, continues to…

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Amenities Rise in Importance as Greater Philadelphia Users Return to Offices

Taylor Williams — Mon, 19 Sep 2022 11:37:32 +0000

By Marc DeLuca, CEO and eastern regional president, KBS Refreshing office properties with updated amenities is a time-tested strategy for infusing buildings with new life and appealing to future and existing tenants. While an asset’s location is a fixed element and a region’s fundamentals tend to change slowly, amenities are more flexible and can usually be implemented quickly if necessary for immediate impact. A recent report by flexible workspace provider TCC Canada found that many companies and their team members increasingly recognize the benefits of gathering teams in a central workplace. But after more than two years of varying degrees of remote work, it makes sense for property owners to invest in amenities that actually meet the needs and wants of office users — which have recently shifted. So which amenities are the best ones to include in today’s office buildings? As an owner and operator of premier office assets for the last 30 years, KBS has witnessed amenity preferences come and go. We know how to spot a passing fad versus a trend with legs. Based on our expertise in this area, here are a few amenities we see attracting office tenants in the current and emerging environment. Scalable…

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Four Factors Driving the Cleveland Office Market Transformation

Kristin Harlow — Thu, 18 Aug 2022 11:45:10 +0000

By Rob Roe and Jessica Urbin, JLL What does the future of the office in Cleveland look like? While there isn’t one straightforward answer, there’s no doubt that the office of today looks much different than it did five years ago. Though some companies still maintain a traditional office space, the onset of hybrid work has indisputably changed the way many companies use — and choose — their real estate. This adoption of hybrid work has driven the market’s evident transformation. Smaller office spaces As companies adopt hybrid work models, the need for larger office spaces decreases. This doesn’t mean companies are eliminating their office real estate, though. In fact, 60 percent of office workers want to work in a hybrid style today, and 55 percent are doing so already. These downsized spaces support this work model by creating shared spaces, such as cubicles or lockers, as well as incorporating more conference rooms and small team rooms to hold private video calls. They also encourage something employees can’t get at home: in-person collaboration. New spaces are being outfitted with intentional spaces to meet, such as lounge areas, desks in open areas, cafés and more. In addition, having small spaces doesn’t…

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Office Activity Picks Up in Metro Detroit as Tenants Make Workplace Decisions

Kristin Harlow — Thu, 28 Jul 2022 11:45:45 +0000

By Ryan Nierman, Ph.D. and Bradley Meloche, Colliers The tumultuous events of the last two years have brought uncertainty into many aspects of Detroit’s office market. Even as companies emphasize their eagerness to return to the office, many questions remain regarding space designs, required square footage and buildout requirements. Tenant selectivity With increasing vacancy rates and negative net absorption throughout the metro Detroit office market, real estate experts are witnessing tenants becoming more selective in property occupancy. The result has been a slowing demand for Class B and C office product. Tenants have begun targeting Class A assets with improved visibility, signage, modernized color schemes, numerous amenities and flexible floorplan designs. As the need for larger office footprints goes down in reaction to post-COVID considerations, tenants have become willing to pay increased per-square-foot rents, for at or below preexisting rental budgets, due to decreased size requirements. The need for tenants to target Class A facilities has been compounded by the so-called “Great Resignation,” as employees are willing to demand more from their employers. As a result, employers know that a failure to invest in a more modern and amenitized workspace may result in poor employee retention and future talent recruitment. …

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Air Force Base Propels Dayton’s Office Market

Kristin Harlow — Thu, 14 Jul 2022 11:45:11 +0000

By Richard Meder, Colliers While office markets across the country have experienced a slow climb back to normalcy following COVID-19-related restrictions, the Dayton office market has found its strength in the Wright-Patterson Air Force Base (WPAFB). Though the Dayton office market around WPAFB experienced similar ebbs and flows as that of the rest of the country during the pandemic, business never stopped. For some in other markets, the lasting effects of this disruption to the office market remain unknown. Business leaders must decide whether to implement a remote work lifestyle into their employee regimen or make a push to get back to normal office life — for some companies it is considered a hybrid approach. For the tenants in the WPAFB submarket, however, there was never question. While many office tenants vacated their spaces out of uncertainty, defense contractors cautiously occupying office spaces at the WPAFB submarket almost singlehandedly helped Dayton remain upright during the pandemic. With the submarket almost entirely consisting of defense contractors, this type of defense contracting work was not allowed to stop with the rest of the world. Having to adhere to both local and federal guidelines, decision-making among defense contractors certainly slowed, but it never…

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Collaboration, Creativity and Coffee: Reasons Why the Office Still Matters

Kristin Harlow — Thu, 30 Jun 2022 11:45:06 +0000

By Chris Curran and Alexa Strickler, R&R Realty Group It’s no secret that the past couple of years have been dramatically different for us all. We’ve had to adjust to new routines, new practices and new ways of getting work done. Some of these new things will be here to stay while others have already receded into memory. No matter the amount of change though, one thing remains the same. That’s the need for human connections and relationships. And, ultimately, that’s what physical office space provides. It seems many organizations are starting to understand just how valuable this connection truly is. Across various submarkets within the Des Moines metro area, companies large and small are returning to in-person work. And it’s not just existing customers returning to their spaces. There has been a marked uptick in office leasing activity in locations ranging from downtown to the western suburbs. From advertising agencies to accounting firms and more, the vacancy rate across the entirety of central Iowa is beginning to be chipped away. Why are so many companies across a wide variety of industries heading back to the office? Well, like we mentioned earlier, there’s a sense of connection and an ability…

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