Commercial Real Estate Will Be More in Demand, Not Less
Dec 04, 2014
As soon as we entered the online world, the commercial office market was destined to shrink. Employers thought workers could work from home, leave their offices, move to distant lands both in the U.S. and abroad and continue to work effectively.
For awhile, the dream of workers moving back to small towns, living on the countryside while simultaneously working in high-tech jobs looked like it was the way of the future. The salvation of small town America was seen when these towns began growing again for the first time since before World War II.
When the smart phone and tablet were introduced, more opportunities were created for working outside of the office. The need for office equipment started to decrease as large server rooms and copy machines started to disappear. Most businesses reduced or eliminated these tools entirely as we see more companies continue to move into the cloud and become paperless.
Lastly, businesses have to deal with the overall inefficiencies that come up when asking employees to commute to the office instead of working from home. All of this would assume a huge decrease in the need for office space.
Yet, the reverse has happened. Due to the great social experiment of having workers work remotely, major flaws are being recognized. Network failure causing major issues while working from home, not to mention the lack of collaboration with colleagues. Firms such as Yahoo are realizing the value in getting that face time and have started calling their workers back into the office. They were seeing was a lack of company community when workers were not present live and in person. There was also a sharing and collaboration that exists when people physically work together. It’s interesting to note that Yahoo’s stock has gone up over 30% since their announcement of bringing workers back to the office.
The whole online experience is new by social standards and therefore will ultimately decide as to what will work and not work. The next generation of "dot.com-ers" is now moving into collaborative spaces and working in close environments, which have created a new office ambiance. A great example of this is WeWork and Rocket Space. These office centers are all about collaboration and being around other people who can support each other. The innovation world is exploding not online, but in offices.
The office market has picked up on this potential growth and across the country, office spaces are being redesigned to look more like fun, inspiring, and collaborative spaces rather than traditional "corporate and boring" work spaces. Gone are the days of private offices and dropped ceilings.
The industrial design of concrete floors and exposed steel are more on trend. It’s true that the majority of growth in office space is in tech hubs such as San Francisco and Seattle, but cities such as Indianapolis are also seeing firms like Salesforce looking for major office space in their downtown area. For the first time since the 1980’s, Indianapolis is expected to go through a major growth spurt.
The office market is posed for real growth as evidence by the value of commercial firms continue to rise. REITS (Real Estate Investment Trust) and firms such as WeWork have seen their overall valuation at 1.2 billion, with still limited locations and Regus with a valuation of 2.1 billion with 2,000 centers. These firms will transform the way office space will use but it clearly will help the office market grow to new heights in the coming future.
Photo Credit: Doblin/Monitor via Compfight cc
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Written by: Hans Hansson
Hans Hansson is President of Starboard TCN Worldwide Real Estate Services as well as a member of the Board of Directors for TCN Worldwide Real Estate. Hans has been an active broker for over 29 years in the San Francisco Bay Area and specializes in office leasing and investments. If you have any questions or comments please email firstname.lastname@example.org or call him at (415) 765-6897. You may also check out his website, www.commercialspacefinder.com.