Special
Report: continued
1. Changing Office
Leases (Traditional Leases vs. License Agreements)
The reason long-term
leases exist is because lenders need assurance of
payment, but that continues to shift as businesses
explore creative office space options, including
co-working spaces.
“Co-working spaces are
becoming more abundant, but traditional offices are
still needed. The office space footprint is
changing—fewer private offices and more open, modern
collaborative environments. Less office space per
employee will continue as technology, flex scheduling
and work outside of the office increases,” said Paul
Tesdal, senior vice president, Podolsky Circle/CORFAC
International in Chicago.
“While I don’t see the
WeWork’s of the world becoming the new landlords en
masse, I do see a continued and healthy trend in this
direction, especially as entrepreneurialism becomes more
popular. Companies can mitigate vacancy costs while
ramping up,” added Hayim Mizrachi, CCIM, president, MDL
Properties/CORFAC International in Las Vegas.
2. The E-commerce
versus Brick-and-Mortar Battle Continues
This battle rages because
people continue to make more purchases online; yet
people still want to be able to touch and feel many
products they are buying.
“The firms that embrace
both e-commerce and brick and mortar will win. Brick and
mortar footprints are getting smaller and industrial
footprints for e-commerce distribution facilities are
getting larger,” said Sim F. Doughtie, CCIM, MCR, SIOR,
SLCR, president, King Industrial Realty/CORFAC
International in Atlanta.
“Firms like Home Depot are
setting up omni-channel systems where they ship pallets
to their retail stores, they ship online sales from
purchasers to individual homes and they ship online
sales to retail stores where customers can pick up their
orders when it is convenient,” he added.
Tesdal agrees. “E-commerce
is here to stay…I don’t think we will ever get away from
brick and mortar, but it may not be the same.”
3. Immigration and
Trade Agreements
Anticipated changes to
immigration policy in the U.S. and trade agreements are
impacting the workforce worldwide and, as a result,
commercial real estate demands.
“Limiting H1B visas forces
companies to hire home-grown talent. Perhaps this will
lead to more outsourcing, reducing demand for office
space. Or, more balanced trade agreements may allow
foreign capital to flow toward more stable U.S.
markets,” said Cole Sweatt, vice president, TRI
Commercial/CORFAC International in San Francisco.
“In Mexico, Chinese and
other Asian companies are looking to take the place that
U.S. companies are not willing or are afraid to take, so
in the short term there will be low activity, but after
a few months business should be normal again,” said
Miguel Cavazos, CCIM, SIOR, chief managing partner,
Citius Capital/CORFAC International in Monterrey,
Mexico.
4. Retail Space Is
Reimagined
In retail, three big
trends continue: smaller footprints, fewer stores and
flexibility.
“Leases are shorter than
in the past with the exception of flagship stores. For
instance, Starbucks is rumored to be planning a 35,000
square-foot roastery concept along Michigan Avenue in
Chicago,” said Tesdal.
“We are seeing a
reimagining of the uses of large retail spaces with
gyms, escape rooms and even some call center and
back-office spaces,” explained Mizrachi. “Imagine
marrying augmented reality with escape rooms. Throw in a
coffee shop, connect all of these locations on a social
platform, and you have a national franchise that
leverages the obsolescence of cheap rent from vacated
grocery stores.”
5. The Millennial
Effect on Offices
Today’s office workers
seek more experiences in the workplace, which requires
open space, team rooms and the space to bring in
breakfast and lunch. While much of this falls on
employers to get creative, landlords can help make the
experience count.
“Landlords should offer
amenities like charging stations, food vendors,
proximity to public transportation and energy
efficient/environmentally conscious buildings,” said
Sweatt.
6. Construction
Costs Rising
When construction costs
increase, so do leases and sales prices.
“In the industrial sector
we see an increase of valuations of existing buildings,
because as construction costs, land costs and soft costs
rise buyers are willing to pay more for existing
product,” said Scott Hensley, CCIM, SIOR, principal,
Piedmont Properties/CORFAC International in Charlotte,
NC. “One of the three valuation methods used in
appraising properties has always been replacement cost,
so as the cost to replace a property increases, the
value of the existing facilities increases.”
7. Warehouse and
Industrial Space Expands
E-commerce distribution
warehouses are getting larger and smaller at the same
time.
“Initially, the favored
size for an e-commerce warehouse was 800,000-1.2 million
square feet, not very close to population centers, and
they grew to be 1.5 to 1.8 million square feet,”
explained Doughtie. “As customers began to demand
quicker deliveries, e-commerce firms started occupying
smaller facilities of 200,000-500,000 square feet closer
to population centers where items could be shipped
within hours.”
Source:
http://www.globest.com/native-ad?mvi=6078037f9c074151991e8102a97b2b4d
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