10C — February 28 - March 13, 2014 — Commercial Office Spotlight — Mid Atlantic Real Estate Journal
www.marejournal.com
NAI S ummit
By Jay Haines, NAI Summit It’s a new age - natural selection and office market trends
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a centralized office or spend less time there. Tenant credit quality at times is uncertain; many companies appear sol- vent but lack sustainability for long term lease commitments. Even blue chip tenants can- not be counted on to expand their space requirements as evidenced by the financial and accounting firms continuing to offshore and outsource. Pa- perless document storage has reduced the demand for con- ventional methods of record maintenance. Value conscious tenants want hyper-efficiency looking to take a percentage of their previous space and put more employees in it; all driven by economic uncertainty and cost containment, where the man- tra is ‘smaller and smarter”. Contraction in space use will tend to keep vacancy near cur- rent rates and challenge inves- tor willingness for new projects in most U.S. markets. So will the specie survive? The answer is absolutely, in an altered form; a process which is well under way. Though lagging behind the other com- mercial property sectors, office is benefitting from the exten- sive, necessary and extended construction slowdown. Ab- sorption increases and modest rent tick ups in the stronger 24 hour downtowns and other markets having high-tech and energy related businesses. In- vestors look to focus more than ever on location. That trend is shifting toward urban, dense, and vibrant places, having a diversity driven by educa- tional institutions or medical complexes. Winning the bricks and mortar battle are those sites offering tenants flexibility allowing cost effective lay- out changes to accommodate open space plans and Wi-Fi technologies. Green buildings with high ratings and energy efficient systems will out do their competitors. Tenants fo- cus heavily on their operating expenses and find they attract young millennial talent with a ‘cool’ space work environment. This new aged office employee doesn’t want or need the cor- ner office; or a cubicle for that matter. Free-flowing spaces and portable electronic devices encourage collaboration; and boost results. The prized fam- ily photos no longer adorn the Continued on page 20C
ike the dinosaur, Edsel and leisure suit; so it seems the office cubi-
trends in the office market. The nature of the current office market as the analysts call it is buffeting “secular headwinds”. Tenants continue to downsize per capita space requirements. 2010 saw a national average of 225 s/f per employee. That has dwindled to 176 s/f in 2013 and projected to drop to 151 s/f per employee by 2017. By that same year forecasts estimate 40% of companies expect the average work space to be 100 s/f or less per employee. Technology enables more employees to work away from
cal, seques- tered worker, and 50 acre office park are marked for change. Charles Dar- win, was a na t u r a l i s t no t e c ono -
Jay Haines
mist but certainly had the appropriate business model in his “natural selection” theory for it certainly applies today to the ongoing evolutionary
PPL Center Arena
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95 Highland Avenue, Bethlehem 840 W. Hamilton St., Allentown 1837 Linden Street, Allentown
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638 Hamilton Street, Allentown 1550 Pond Road, Allentown
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2100QuakerPointeDrive,Quakertown 352 5th Street, Whitehall
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CONTACT NAI SUMMIT | 610.264.0200 | 3435 WINCHESTER RD., SUITE 300, ALLENTOWN, PA 18104 | WWW.NAISUMMIT.COM RETAIL • OFFICE • MEDICAL • INDUSTRIAL • MIXED USE • LAND • INVESTMENT
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