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US Office Market Continues to Expand Ahead of Forecast

Posted July 9, 2019

By Dr. Harry Guirguis and Dr. Joshua Harris

Office Leasing Activity Expected to Grow Amid Sustained U.S. Economic Strength

The U.S. office market continues to expand ahead of forecast, posting 18 million square feet of net absorption in the fourth quarter of 2018 and 11 million square feet in the first quarter of 2019. Continued economic growth and increases in job creation are likely the main forces behind these levels of new leasing.

With first-quarter U.S. GDP growth of 3.2% annualized and a current unemployment rate of 3.6%, U.S. office space demand should remain strong during 2019. Dr. Harry Guirguis, Manhattan College, and Dr. Joshua Harris, New York University expect demand to register an average of 13.5 million square feet of net absorption per quarter, which will moderate slightly to an average of 12.7 million square feet per quarter in 2020. This forecast is driven by continued expected strength in office-using employment, which has grown twice as fast as general employment. According to the U.S. Department of Labor’s March 2019 jobs report, the primary office-using sector, Professional and Business Services, grew 1.22% year-over-year compared to just 0.6% for total nonfarm employment.

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The Workplace Makeover: From Office to Destination

Posted July 8, 2019

By Diane Hoskins and Andy Cohen

To lure top talent, employers must integrate technology and unique experiences into their spaces.

The future of cities is predicated on people. As engines of economic growth, urban areas are the life source of the built environment, with 80 percent of global GDP resulting from their output. The most vibrant cities are those that attract diverse talent with varied skills, perspectives and backgrounds. All of this is driving change and transformation in how people live, work and play.

Looking at the built environment, there is no place that is being more profoundly impacted than the workplace. To retain and inspire the best talent, the most successful organizations will be the ones that adapt their workplace strategies to focus on creating a destination with visceral experiences, an “always in beta approach” and purpose through space.

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Big Data in Office Buildings Holds Promise Despite Privacy Worries

Posted on March 29, 2019

By Margarita Foster

Property managers are using “dynamic and multidimensional” information for operations but not yet for tenant engagement.

A white paper published by the NAIOP Research Foundation titled “The Office Property and Big Data Puzzle: Putting the Pieces Together”found that office building owners are capturing, storing and analyzing data to operate building systems but not to recruit and retain tenants.

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CRE Must-Reads

Posted on January 21, 2019

  • Debunking The Three Myths Of Commercial Real Estate Technology - Forbes (Jan. 2, 2019) Read more
  • Google's Take on Co-Working and Sharing Spaces - GlobeSt.com – Subscription required (Jan. 7, 2019) Read more
  • In 2069, Your Food Will Shop for You - Medium (Jan. 3, 2019) Read more
  • Opportunity Zones: Navigating A Path to Investment - Newmark Knight Frank (December 2018) Read more
  • The surge in online-shopping returns has boosted the warehouse sector - CNBC (Jan. 4, 2019) Read more
  • Why developers are offering 'experiences' to attract suburbanites - Washington Post (Jan. 3, 2019) Read more
  • The Year Ahead: Down But Not Out - GlobeSt.com – Subscription required (Jan. 7, 2019) Read more

Resurgence in Office Leasing Due to Breakout Economic Growth

Posted on December 13, 2018

By Dr. Hany Guirguis and Dr. Joshua Harris

The U.S. office market posted solid net absorption levels in the second and third quarters of 2018 of 18.0 million and 11.0 million square feet, respectively. This level of new leasing is likely due to higher-than-expected economic growth and the subsequent demand brought about by jobs created in the office-using sectors.

Due to third quarter 2018 U.S. GDP growth of 3.5 percent and a current unemployment rate of 3.7 percent, 2018 is expected to register nearly 13.0 million square feet of net absorption per quarter, significantly outpacing 2017 and 2016 when the quarterly figures averaged 9.5 million and 10.4 million square feet, respectively. The forecast is strongly dependent on continued annual economic growth near 3.0 percent, which seems plausible for all of 2019 and into 2020 given current data.

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Designing Spaces to Create Great Experiences

Posted on December 12, 2018

By Andy Cohen

A Gensler study quantifies that the right design can result in great experiences, which in turn are great for business.

Today, the goal of every project that forward-thinking architects design is to give people positive experiences. Clients in every sector, including commercial real estate, are struggling to keep up with the dramatidec evolution of how people work, live and shop today – and those who aren’t are sacrificing business performance. To better understand – and to quantify – the link between design and delivery of a great experience, Gensler developed the Gensler Experience Index, a first-of-its-kind mixed-methods research approach to create a holistic Experience Framework for understanding experience and quantifying the effect of design on that experience.

The Gensler Experience Index is the result of a rigorous investigation that combined qualitative ethnographic research with quantitative research to identify the design factors that are most important in creating exceptionally great spaces and places. After several years, five roundtables, 60+ hours of one-on-one ethnographic observations and a survey of more than 4,000 consumers, the Gensler Experience Index  quantifies and brings greater depth to what many in the design industry already knew instinctively – that great design is an important component of great experiences.

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Resurgence in Office Leasing Due to Breakout Economic Growth

Posted on November 21, 2018

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q4 2018.

Key Takeaways

  • 2018 is expected to register nearly 13.0 million square feet of net absorption per quarter, significantly outpacing 2017 and 2016 when the quarterly figures averaged 9.5 million and 10.4 million square feet, respectively. 
  • The current macroeconomic expansion will most likely continue beyond next summer, which will officially make it the longest sustained economic growth period in U.S. history. 
  • However, the biggest limitation to the expansion of firms that use office space is likely to be the ability to hire qualified employees.

Regarding office space demand, the ultimate determinant of long-term growth will be how the business sector reacts to rising wages and interest rates.

View the forecast.

Putting Together the Office Property and Big Data Puzzle

Posted on October 15, 2018

By Jennifer Lefurgy, Ph.D.

The use of technology in office building operations has come a long way from motion-controlled light sensors and key card entry systems. Building owners and operators are beginning to use an array of increasingly sophisticated software and hardware to gather more information about how their buildings can not only can work more efficiently, but give them insights into how to attract and retain tenants. The NAIOP Research Foundation’s new report, The Office Property and Big Data Puzzle: Putting The Pieces Together, by Kimberly Winson-Geideman, Ph.D., discusses what defines big data, how it is being used by building owners, and some of the issues those who are working with big data should consider.

Big data is defined as high-volume, high-variety and high-velocity information that is produced in either structured formats (e.g., sensor data) or unstructured formats (e.g., pictures, text). The sheer influx of big data can be overwhelming for many companies; they often choose to sit on the data they collect with no concrete plans to use it. Therefore, some firms, particularly those without the resources to sift through large amounts of data, risk missing valuable information that could improve their bottom line and position them favorably in an increasingly competitive market.

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Marcus and Millichap: Competition for Staff Invigorates Office Space Demand

Posted on July 16, 2018

The number of available U.S. jobs now exceeds the number of people out of work and seeking employment. At the end of April, job openings stood at 6.7 million while the number of unemployed reached 6.3 million. The June 2018 Marcus and Millichap Research Brief finds that an effect of a competitive labor market is that office-using employment is driving down office vacancy rates, and over the past 12 months, the professional and business sector has been expanding at a faster pace than overall employment, driving up office demand. The professional and business sector added almost 500,000 jobs and grew at 2.5 percent compared to the national rate of 1.6 percent. The increased hiring, according to the report, drove down the national office vacancy to 13.8 percent in the first quarter of 2018.

Amenitize to Survive: Why traditional amenities are no longer enough

Posted on June 19, 2018

Years ago, the key to attracting and retaining a talented workforce was to relax the rules a bit: Casual Fridays, flexible work hours and teleworking were the employee perks du jour.

Now, the competition for top talent is driven by the demand for amenities of the less tangible type. The highly specialized labor force seeks a “more interactive, collaborative and socially vibrant office environment,” with “amenities that enliven the workplace and create the elusive concept of community,” according to NAIOP Research Foundation report, Activating Office Building Common Spaces for Competitive Advantage.

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Top Office Obstacles: Parking and Technology

Posted on June 11, 2018

According to a new Cushman and Wakefield report, Space Matters: Key Office Trends and Metrics, two important trends in office space include technology amenities and parking. Common amenities – such as fitness centers and cost-effective food options – remain very important but there is ample opportunity for growth in how technology-related amenities are leveraged by occupiers and landlords. Despite advances in technology, researchers found many office building owners continue to struggle with some of the most basic offerings such as seamless, high-speed internet and cellular service.

In many urban submarkets, parking supply is a challenge and high prices have been forcing innovative solutions. According to the report, the predominant reason people utilize ride-sharing services such as Uber and Lyft is to avoid parking. In some cases, this has led owners to provide valet or shuttle services to connect offices with off-site parking, including garages in different parts of a city.

Elevating Workplace Architecture and Design

Posted on June 7, 2018

By Marie Ruff

Office architecture and design have incorporated various popular influences in recent years: smart office tools, the open-ceiling industrial-chic aesthetic, and the “experiential office” trend, to name a few. The field has been slower, however, to adopt findings from positive psychology into office form and function.

Positive psychology, the scientific study of the condition and strengths that enable individuals and communities to thrive, provides tools that can be used to enhance worker’s well-being, said architect Charles First, AIA, CCM, CFM. In his recently published book, “A Place to be Happy: Linking Architecture & Positive Psychology,” First drew from his more than 30 years as a registered architect with experience in architecture, project management and owner-side office culture.  The book incorporates results from his own workplace studies, and along with findings from researchers across the U.S., establishes criteria for shaping spaces for the benefit of the people who work there.

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New Office Space Demand Forecast: Signs of a Structural Shift

Posted on May 31, 2018

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q2 2018.

Key Takeaways

  • The U.S. office markets absorbed just 1.3 million square feet on a net basis in the first quarter of 2018, according to CBRE. 
  • This performance represents a significant conundrum, as every economic indicator used to forecast absorption performed at or above the forecast level. 
  • While the first quarter reading may be a one-time anomaly, it cannot be discounted that a structural shift in the office space market has or is occurring
  • The forecast for net absorption of office space has been reduced to 8.4 million square feet per quarter for the remaining three quarters of 2018.

On a positive note, many developers, lenders, and even tenants are not over-expanding or being overactive, meaning that there is a low likelihood that there will be excess space that they will need to vacate in a downturn.

View the Q2 2018 Forecast

Amazon Tells Cities Why They Failed to Qualify for HQ2

Posted on May 25, 2018

The Wall Street Journal recently reported that Amazon.com Inc. has made about 200 phone calls to cities which failed to make the cut for consideration as a location for the company’s second headquarters. Some of the cities say they are "learning from the disappointing phone conversations and making changes." For example, Detroit is now considering strengthening its regional transportation network after Amazon officials told them it was the main reason the city did not make the HQ2 short list. The city did not have enough tech workers to fill 50,000 jobs and had no way, other than cars, of bringing people from outside the city limits to work at the proposed site. Additionally, Cincinnati, Ohio, and Sacramento, California, are restructuring workforce development programs to focus on tech talent. Orlando, Florida, is considering starting a community fund to invest in local tech companies and draw more entrepreneurs.

Traditionally when bargaining with big companies, according to the article, the site selection process is negotiated without fanfare, among a company, their consultants and local government. The "highly visible" Amazon process is forcing cities to explain why they did not reach the second round and address those weaknesses. "It is a kind of look-in-the-mirror moment," said Joseph Parilla of the Brookings Institution. Other experts warn cities should not operate at the behest of large companies and should instead establish their own priorities.

Female Coworking Spaces: On the Rise and Under Scrutiny

Posted on May 2, 2018

By Jennifer Lefurgy, PhD

According to a recent Global Coworking Survey, 1.7 million people will be using 19,000 coworking spaces around the world by the end of 2018, and 40 percent of those users will be women. Since the industry launched in the mid-2000s, coworking companies have marketed to predominantly young, single men and provided associated amenities such as pool tables, craft beer, and other lures that typically encourage male bonding. This strategy has begun to change as the number of women using coworking services is predicted to rise and as women continue to voice their need for safer workplaces. Several female-focused coworking companies such as ShecosystemPaper DollsBloomRise Collaborative Workspace and Hera Hub have opened multiple locations in North America and Europe. Women-centric workspaces offer what traditional coworking spaces do not: calm, spa-like interiors; child care; lending libraries featuring female authors and mentorship programs.

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Does Your Modern Build-out Have a Hearing Problem?

Posted on April 13, 2018

By: Clay Edwards

Open ceilings, exposed concrete floors and glass-walled spaces are the hallmarks of contemporary interiors. These design choices convey a hip and modern mindset for the companies and retailers that inhabit them, but they can come with a drawback that impacts business: noise.

Without the sound-dampening effects of the acoustical tiles used in drop ceilings and wall-to-wall carpeting and other soft surfaces, ambient noises such as conversations, whirring heating and cooling systems, and shifting furniture are amplified. And plans to mitigate this heightened noise can add extra materials, labor costs and time to your build-out.

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Office Survey Results: Lack of Privacy Hinders Productivity

Posted on March 21, 2018

By Ioana Neamt

With all the talk of the modern workforce expecting autonomy and companies offering flextime and work-from-home arrangements, most U.S. companies still try to get employees to show up at the office. So naturally, there is ongoing interest in the discussion about the most efficient and pleasant work environment and what that might look like. Over the decades, we’ve seen several attempts by designers to rethink the office space, from Herman Miller cubicles, to the rather controversial open-plan layout and the currently highly-sought-after co-working trend. Companies have several motivations for trying out new layouts: cost-effectiveness, the need to expand quickly following a growth in the number of employees, the desire to have an office design that reflects the company culture, and so on. However, there is still one question left unanswered: what do employees have to say about their workspaces?

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The Urban-suburban Office Market Upswing

Posted on March 15, 2018

According to a VTS blog post, The Rise of the “Urban-Suburban” Office Market, many companies want their offices to be in dynamic locations that appeal to young professionals, but that no longer means only downtown markets. Suburban office construction was strong throughout 2017, but the markets that will fare the best will have “urban-type” amenities such as walkability, public transit, a variety of housing options, retail and restaurants. The article warns, “Owners and developers of suburban office buildings that don’t embrace this urban-suburban ‘vibe’ might find it tougher to justify new developments or sign new tenants. Simply offering big office buildings and huge surface parking lots are not often enough to draw companies today. It’s more about creating a mixed-use destination.”

CRE's Critical Contributions to US and State Economies in 2017

Posted on March 14, 2018

By: Dr. Stephen S. Fuller

Development and construction of new commercial real estate in the United States – office, industrial, warehouse and retail – generates significant economic growth at the state and national levels. This annual study, “The Economic Impacts of Commercial Real Estate,” published by the NAIOP Research Foundation, measures the contribution to GDP, salaries and wages generated and jobs supported from the development and operations of commercial real estate.

Commercial real estate development and operation of existing buildings generated the following economic benefits:

  • Supported 7.6 million American jobs in 2017 (a measure of both new and existing jobs).
  • Contributed $935.1 billion to U.S. GDP.
  • Generated $286.4 billion in salaries and wages.
Click here to read more.

2018 Workplace Trends: Healthier and Homier

Posted on March 7, 2018

Architect and Work Design magazine publisher Bob Fox has identified seven major trends that he predicts will make an impact on the workplace in 2018. To attract and retain top talent, he believes businesses will create health-oriented workplaces that offer a sense of community through wellness programs and collaborative projects with other building tenants. Fox also sees the rise of “resimercial” office designs that bring the comforts of home into work and can accommodate a broader range of functions. Other trends Fox predicts include office designs that reflect the companies’ missions, the prioritization of overall value rather than cost reduction when redesigning space, the use of virtual assistants, and women leading change to create healthier, higher-performing workplaces.