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Examining New Types of Tenant Amenities

Posted on February 21, 2018

By: Richard B. Peiser, Ph.D. and Raymond G. Torto, Ph.D.

Office building owners have found that to remain competitive in today’s marketplace, they must enliven their buildings by offering more amenities and adding vibrancy to the common areas. Some have introduced a range of new amenities, including outdoor workspaces and food trucks, and they have also programmed areas with happy hours, featured speakers and other activities. The common element in these amenities is that they all “activate” the common space by creating opportunities for socialization among tenants and the opportunity to work in areas beyond the tenant’s suite.

The study examines the following:

  • New and different types of amenities that owners are including in buildings, their locations within the building, what they cost and how they are funded.
  • Programming or social gatherings in building common areas, the types of activities offered, their frequency, what they cost and how they are funded.
  • Whether coworking space is becoming an amenity that owners must offer in their buildings so that tenants can have access to space for occasional overflow situations.
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US Office Market Slowed in 2017

Posted on January 17, 2018

Analysis by Reis, Inc. shows the U.S. office market in 2017 experienced a slowdown in tenant expansions while supply growth stayed at about the same level as in 2016. As reported in the Wall Street Journal, the survey of 79 metropolitan areas revealed that net absorption at the end of 2017 was at its lowest since 2012. In 2017, developers added 37.6 million square feet, only 1 million square feet more than in 2016, which may mitigate slower absorption rates. Vacancy increased during the fourth quarter of 2017 in 33 of the 79 markets, with New York having the lowest (8.7 percent) and Dayton, Ohio, the highest (27 percent). According to the report, growth in absorption has been falling in part because tenants have become more efficient in how they use their space, eliminating private offices and encouraging employees to work closer together. The report stated, “office-based industries are healthy, but tenants have persisted in curbing overall leasing patterns.”

View the current NAIOP Office Space Demand Forecast.

Is Office Demand on the Rise?

Posted on December 29, 2017

The NAIOP Office Space Demand forecast has shifted upward to above 10 million square feet of absorption in 2018, said Dr. Josh Harris on the recent exclusive NAIOP member webinar on what's shaping office space demand. What's the outlook for the U.S. economy and what does it mean to you? Find out in the full archived webinar. 

Click here to view the webinar.

Will Office Densification Continue?

Posted on December 21, 2017

Has densification of the office environment reached a tipping point? Yes, say research directors from national real estate brokerage, data and investment firms, whose consensus is that on the whole, office densification is either approaching or has already reached a tipping point, as most of the larger office space users have already downsized and the smaller ones that are left to downsize are not expected to move the market.

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Bringing the Outside In

Posted on November 22, 2017

By Roger Heerema

A fresh-air, 28th-floor amenity lounge has transformed a Chicago office tower.

EXPANSIVE CITY views might be the greatest advantage offered by an upper floor of a downtown high-rise. But once you turn your back to the windows, it’s easy to forget that you’re in the center of a bustling city. You could be on any floor of any office building, anywhere.

That’s not the case at 200 West Jackson, a recently redeveloped building in downtown Chicago. On the 28th floor of this office tower, windows open during warm weather months to bring in fresh air and the sounds of the city below. This full sensory experience creates an inviting and comfortable atmosphere for a hospitality lounge, where building tenants socialize, collaborate and recharge.

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The Benefits and Risks of Triple Net Leases

Posted on October 3, 2017

By: Richard R. Spore III

What do office and retail property owners need to know about triple net leases?

A commercial real estate project’s value is typically based on its net operating income, which equals rental income minus operating expenses. The allocation of operating expenses between the landlord and tenants is, therefore, an important factor in the project’s value. Most commercial leases use some variation of two basic operating expense allocation models:

Gross rent model: The landlord pays 100 percent of operating expenses from gross rent paid by the tenants.

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Medical Office Space May Defy Market Volatility

Posted on September 28, 2017

According to CBRE’s inaugural report on the U.S. medical-office market, the steady demand for and investor confidence in healthcare-related workspace indicates it may be a “resilient sector, able to weather economic downturns and political changes.” The age 65-and-over population – now accounting for the highest per-capita healthcare spending – will nearly double by 2055 and drive an increased need for medical office space. Some findings include:

  • “Cost containment is driving health care industry consolidation and fueling demand for less expensive delivery settings, such as medical office buildings and urgent-care facilities, as well as new technologies that can produce better patient outcomes at lower costs.”
  • “Absorption of medical office space has outpaced new supply for the past seven years, lowering the segment’s national vacancy rate to 8% as of Q1 2017.”
  • “Rising investor confidence in medical office space has resulted in increased transaction volume in the segment, which reached nearly $10 billion for the year ending Q1 2017 and pushed cap rates to a record-low average of 6.8%.”

The report includes 30 U.S. market profiles and identifies metropolitan areas with low concentrations of healthcare employment and rapidly aging populations, including Atlanta, Las Vegas and Denver. According to the report, these markets will need to ramp up healthcare employment to meet current and future needs.

Top Office Markets Solid in Second Quarter

Posted on September 7, 2017

In its latest “U.S. Top Office Metros Snapshot,” Colliers reports that “fundamentals in the 10 major office markets in the U.S. largely remained solid during the second quarter.”

The report finds that vacancy rates were unchanged in three markets, increased in four markets, and declined in three others. “Rents held firm in six of the markets tracked in this report. At the same time, two key factors point to upward pressure on vacancy rates: tenant downsizing and new supply,” the report states.

Some details from the report include:

  • “Three markets – Manhattan, the San Francisco Bay Area and Seattle – have office vacancy rates well under 10% and saw no increases in the second quarter.”
  • In Houston, vacancy is back above 20 percent.
  • “Concerns over the impact of new supply in San Francisco and Seattle are receding, but two markets – Los Angeles and Washington, D.C. – remain exposed to construction risk.”
  • Boston and Dallas markets remain solid.

JLL Reports on Office Market in Second Quarter

Posted on August 28, 2017

The office market absorbed 8.8 million square feet of space in the second quarter, according to a report from JLL. More than half of that growth came from two markets: Seattle-Bellevue and Dallas.

“There were 11.7 million square feet of new deliveries in Q2, which helped push vacancy up to 14.8 percent,” according to JLL’s latest outlook. “Even as demand stabilizes, asking rents for new product have risen 3.2 percent over the year and by 4.9 percent for CBD Class A space.”

“Moving into the second half of 2017 and into 2018, we expect the wave of new supply to deliver over the next six quarters will markedly alter the office landscape, increasing competition among landlords for tenants and stabilizing rents in the process,” the report states.

More Companies Go Where Employees Already Are

Posted on August 7, 2017

In the twenty-first century, many employees can work remotely, making it theoretically possible for them to reside in far-flung, less expensive suburbs. But employers are moving in the opposite direction, abandoning smaller towns to relocate their headquarters in large cities.

Two of the latest to move are McDonald’s and Caterpillar. The Washington Post reports those companies are moving their headquarters out of Oak Brook and Peoria, Illinois. McDonald’s is moving to Chicago, Caterpillar to nearby Deerfield. They are not alone.

“Aetna recently announced that it will relocate from Hartford, Conn., to Manhattan; General Electric is leaving Connecticut to build a global headquarters in Boston; and Marriott International is moving from an emptying Maryland office park into the center of Bethesda,” the Post reports. “Such relocations are happening across the country as economic opportunities shift to a handful of top cities and jobs become harder to find in some suburbs and smaller cities.”

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Office Sector Booms in Second Quarter 2017

Posted on July 28, 2017

The U.S. office sector bounced back in the second quarter of 2017, absorbing 12.8 million square feet of space, according to Cushman & Wakefield. That’s more than twice the 6.3 million square feet taken up in the first quarter and the highest level since the third quarter of 2016. Cushman & Wakefield expects solid absorption in the near future as well.

“Even eight years into the cycle, office-using job creation remains healthy and solid in most markets,” the company’s chief economist Kevin Thorpe says. “Moreover, the leading indicators, such as job openings, suggest that business expansion will remain healthy, and by extension, so will demand for office space.”

Cushman & Wakefield finds that rents jumped to a new high nationally, and that construction is ramping up to meet demand. The company says “16.1 msf of new office space was completed across the U.S., the largest amount of space completed since the second quarter of 2009.”

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Inspiring Creativity through Innovative Workspaces

Posted on July 27, 2017

Written by Brielle Scott

Incubators, accelerators, start-up spaces – the lines are often blurred on what these buzzed-about terms mean. In a new report from the Brookings Institute, “Innovation Spaces: The New Design of Work,” authors Julie Wagner and Dan Watch shed some light on these spaces and the trends contributing to their proliferation.

The report outlines three key factors influencing the design of innovative workspaces:

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Beyond 72 Degrees and Sunny Inside: Optimizing the Indoor Work Environment

Posted on July 19, 2017

Written by Dan Diehl

The conversation about indoor environments is changing as tenants leverage new technologies to support employee productivity.

OVER THE LAST decade, a slow and steady evolution has been taking place in the commercial built environment. Building owners, architects, engineers and various service providers are moving to incorporate new technology that optimizes worker productivity, space utilization and the operational efficiency of a building over its useful life. They are also seeking to create workplaces that help companies recruit and retain talent.

Many commercial buildings now include features such as operable windows, dynamic glass, smart metering, prefab construction and chilled beam HVAC systems, all of which aim to optimize the indoor working environment for productivity, health and overall well-being. While a number of these technologies and approaches have been available for quite a while, many are now moving from being the exception to the norm.

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Creating Vibrant Office Building Communities

Posted on July 11, 2017

Design firm Gensler says now is a time of “profound change in how design supports work in all its varied forms,” as the industry sees demand for new real estate products that are “a reflection of new and more collaborative ways of working.”

A forthcoming study by the NAIOP Research Foundation, “Activating Office Building Common Areas,” will look deeper at this trend, specifically examining buildings’ common areas and how some owners are “activating” these common spaces to make their buildings more vibrant.

Through surveys and interviews, the study examines the activities, designs, costs and more associated with creating vibrant communities inside office buildings.

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Creating Community-oriented Office Environments

Posted May 23, 2017

Landlords and tenants have a shared interest in designing office environments that foster collaboration and innovation, with the goal of attracting talented workers and enhancing their job satisfaction, well-being and productivity.