Dear commercial real estate investor – please skip to the last chapter

by Paul Carder on October 7, 2014

By @paulcarderhttps://www.linkedin.com/in/paulcarder

Dear commercial real estate investor, What goes on tour, stays on tour, right? Usually…but I have recently returned from two conferences in the USA, and I feel I have to tell some tales. The first was the Global Workspace Association’s Annual Conference in Florida (@GWAssoc #GWABOCA2014), attended by various sized providers of workspace-as-a-service; mostly hospitality experts and marketers. They are ‘people people’, and I got the feeling that they have their finger firmly on the pulse of what people want from their working day.

The second conference was the International Facility Management Association’s World Workplace 2014 in New Orleans (@IFMA #IFMAWW14), attended by facility / facilities management professionals from around the world. Similarly, I found that many people there really ‘get it’ – that workplaces (offices, especially) are changing. And that change is permanent.

Permanent change…this is the key point really. It is not difficult, in most cities and towns, to drive five minutes from wherever you are, and to find vacant office space. And it will be easy to do so next year…and the year after. And so on. The owners of these vacant office properties may well know something that I do not. If so, I’d love to hear from them. But I just hear occupiers saying they are reducing the size of their office portfolio. And other things are changing too…

One change which was clear to anyone at the GWA conference in Boca Raton – the workspace-as-a-service (WaaS) market is growing. Occupiers (from the sole trader, and small business, through to large global corporations) are experimenting with workplaces leased for short periods of time. Some of the people I spoke with used phrases like “tipping point” and “exponential”. I didn’t take data away with me, but I’m sure it is available and would support these general views.

There are some places, like central London, where you would be forgiven for ignoring these changes. In London, there is a reported shortage of quality available office space. I’m sure that the same is true in other leading global city centres, where corporations will always be looking to attract and retain the best talent. But once you get to the fringes of these cities, or out into the smaller regional cities and towns, the agents (brokers) sign-boards are everywhere.

If I was a commercial property investor, holding tertiary offices, I might be thumbing through the last chapter of my property investment and development textbook. Those diagrams we remember from college, on the ‘property cycle’ – the last stage being redevelopment and/or sale. There just does not seem, to me at least, to be a long-term demand for the soul-less suburban and out-of-town office building. People can (and do) work in so many places today – from home, local ‘hubs’ near home, and many workspaces provided by GWA members. On the days that they do commute to their company office, I’m sure they will prefer a trip into the city HQ – the cool ‘mothership’ where all the money has been spent. But not the boring business park, where the highlight is someone selling sandwiches from the back of a van at 11.30am, and the coffee comes from a jar in the cupboard.

So, my next blog, perhaps “101 uses for a dead office”? All ideas gratefully received (I will quote you, unless you wish to remain anonymous!).

{ 1 comment… read it below or add one }

Ceilidh Higgins October 11, 2014 at 3:34 am

In Australia, there is also a higher vacant rate in older lower grade office buildings. At a conference I recently attended there was a lot of discussion around converting these buildings to residential (some significant developments have already been undertaken in this space). I have also blogged on the idea of what to do with vacant office space
http://themidnightlunch.com/are-you-sitting-in-a-half-empty-office-what-would-you-do-with-all-that-vacant-space/

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