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14C —April 28 - May 11, 2017 — Spring Preview — M id A tlantic
Real Estate Journal
By Sheldon Gross, Sheldon Gross Realty, Inc. The incredible shrinking office suite M ulti -U se P roperties
A
mong the more prob- lematic trends cur- r en t l y impa c t i ng
focused on conserving space. The root of this trend is an embrace of frugality that likely traces to the Great Recession (2007-2009), along with the steady advance of technology that made typing pools obsolete, then more recently consigned fax ma- chines and large desktop computers to the waste heap. In addition, more people are working from home – which either eliminates the need for a formal office back at head- quarters, or at least enables multiple individuals to share a single space.
Business travelers are in- creasingly likely to work from hotel rooms – versus utilizing their company’s nearest satellite location – while some enterprises now operate entirely without an office. Instead, employees work from home or the road, meeting when necessary in conference rooms rentable by the day. Accelerating this trend is the fact that many office buildings were constructed to address past preferences for larger space. As a result, structures with grand dimen-
sions are particularly ill- suited for division into more diminutive suites. So, while some buildings maintain or even increase value follow- ing reconstruction, others see their value continue fall- ing because they cannot be reconfigured. In turn, this situation plays havoc with the owners’ opportunities and with local revenues, since vacant buildings are less reli- able as sources of tax income. So, what can those who derive income related to providing office space do to blunt the financial impact
of the trend toward shrink- ing offices? Actually, there’s an effective, comprehensive strategy, which involves re- inventing the purpose and appearance of structures that originally were intended to host office-based businesses, plus having the municipality involved make the required zoning changes. Here’s how it works: Con- sider a 40,000 s/f office build- ing in New Jersey that previ- ously housed an accounting firm, architectural design group, advertising agency, and export company. In the past, one tenant’s departure would simply lead to another venture taking its place. But in 2017, a building of this type may have multiple vacancies, as existing and potential tenants seek less spacious solutions. For such a structure, an owner may need to arrange for construction that will create a multi-use facility – one featuring several com- pact offices, plus residences, retail space, and perhaps a restaurant. In essence, we’re talking about transforming what was a corporate-style building into what amounts to a self-enclosed village, in which those who choose to invest in space enjoy a heretofore unknown degree of flexibility. A multi-use facility of- fers various benefits that make it a favorable option for many owners. First, the office space it retains will be appropriately compact to appeal to current tastes. In addition, Realtors and other interested parties will be able to work not only with businesses, but prospective homeowners as well – and offer a newly-refurbished, apartment-style space close to amenities, potentially in- cluding an employer. And a restaurant or similar venture is ideal for serving workers during business hours and residents during evenings and weekends. For landlords, transform- ing an office building into a multi-use space will require a significant initial invest- ment. But in the end, it may be the correct strategy for making a suddenly half- vacant location desirable and profitable again. Sheldon Gross is presi- dent and CEO of Sheldon Gross Realty, Inc. n
c o r p o r a t e real estate is a desire among buy- e r s a n d renters for compact of- fices. Until r e c e n t l y , a c c o mm o -
Sheldon Gross
dations with more square footage were a hallmark of professional success. But businesses across multiple sectors are now increasingly
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