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New Report: Overall Gains in Office Demand Following Short-term Challenges

Originally published on behalf of NAIOP Research Foundation on November 19, 2020. 

Negative Absorption of Office Space Expected to Continue in Short Term, Trend Positive Beginning Q2 2021

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q4 2020.

Key Takeaways:

  • Given the continued challenges facing the U.S. economy, office net absorption is forecast to be negative 18 million square feet in Q4 2020 and negative 10 million square feet in Q1 2021.
     
  • Growth in net absorption is forecast to resume in Q2 2021, and the total net absorption over the period from Q2 2021 to Q3 2022 will exceed negative absorption from the recession, resulting in overall gains in absorption over the next two years.
     
  • The largest office-using industries have been more insulated from the effects of the pandemic than the economy as a whole, but their shift to remote-work arrangements has diminished demand for office space.
     
  • Multiyear lease terms have mitigated the effects of reduced occupancy on vacancy rates, which have risen to 14% in the third quarter. Vacancy rates are likely to continue to rise through the end of 2020 as more leases come up for renewal.

 

View the full report.

NAIOP study examines how retail, office buildings will become part of the 'last mile'

Originally published by Marc Stiles on November 5, 2020, for Puget Sound Business Journal 

The tech-fueled evolution of industrial real estate is creating opportunities for underused assets, large and small. The possibilities seem almost endless.

 

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Stay Current on CRE Salaries, Bonuses and Benefits

Originally published on November 17, 2020 in NAIOP's E-Newsletter.

The new 2020 NAIOP/CEL Commercial Real Estate Compensation and Benefits Reports are now available for purchase online. Each includes salary, bonus, incentives, and benefits for up to 200 positions, and data from 100,000 distinct jobs in the office/industrial, retail and residential property sectors. Data is sortable by company size, type, specialization and more.

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Keep Your Salary and Bonus Package Competitive

Originally published on November 10, 2020, by NAIOP Source Weekly E-News.

Is your 2021 salary and bonus package competitive? Find out with the 2020 NAIOP/CEL Commercial Real Estate Compensation and Benefits Reports.

These valuable reports enable commercial real estate businesses to stay current on salaries, bonuses, and benefits for CRE professionals from executives to entry-level positions.

The reports include:

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Virtual Panel – Are Lenders Lending?

Join us on Monday, July 27th as we hear a panel of experts discuss the present state of lending from different lenders’ perspectives on the present commercial lending environment. Submit questions for the panel in advance here.

Panelists

Registration

Registration for members will be free and $15 for non-members through July 22. Beginning July 23, the registration fee will increase to $10 for members and $20 for non-members. Prior registration is required.

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A New Look at Market Tier and Ranking Systems Webinar

Primary Markets, Gateway Cities, Tier 1 Metros – we’ve all heard of them, and many commercial real estate professionals use them to group cities and markets together. Are these terms simply describing the flow of capital, or directing investment away from opportunities in other cities? How do they differ for commercial, industrial or residential properties? This webinar will share takeaways from a recent report from the NAIOP Research Foundation and discuss conclusions on the definitions, uses, advantages and disadvantages of sorting and ranking markets into tiers.

Speakers: 
Maria Sicola
Co-founding Partner, Citystream Solutions

Charles Warren, Ph.D.
Co-founding Partner, Citystream Solutions

Megan Weiner
Managing and Co-founding Partner, Citystream Solutions

Click Here to Register

New Report: COVID-19 Predicted to Decrease U.S. Office Demand

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q2 2020.

Key Takeaways:

  • Due to the turmoil in the national economy, rising unemployment and continued uncertainty about future work arrangements, the U.S. office market absorption is forecast to decline into negative territory through the second quarter of 2021.
     
  • The steepest declines may be experienced in the third quarter of 2020, with NAIOP's model forecasting a drop of 16.3 million square feet. Absorption rates will increase as the economy begins to gain traction in 2021.
     
  • While the economic benefits of density and agglomeration are well-documented, COVID-19 may necessitate a type of "de-densification" in office space, at least in the near term. As a result, current office-using space will face short-term logistical challenges.
     
  • While U.S. states begin the process of a staged re-opening, employees will arguably put a premium on workplace cleanliness. They will also put a premium on personal space, which may contribute to increased demand for office space.
     
  • Many large organizations have begun to consider a "hub-and-spoke" model for work arrangements, enhanced by technology that allows for the economic gains from agglomeration while recognizing the challenges created by the pandemic.
View the full report.

Complete the 2020 Compensation Survey and Receive a Free Report

NAIOP is again partnering with CEL & Associates, Inc. to compile the 2020 NAIOP/CEL Commercial Real Estate Compensation and Benefits Survey. A nationally known real estate advisor, CEL has conducted this survey – the largest in the industry – for 31 consecutive years.

Complete the survey by Friday, April 24th.

Take the Survey

COVID-19’s Impact on CRE: What We Know Today (and Don't)

Join NAIOP Charlotte on Tuesday, March 24th at 2-2:30 p.m. ET for The Advantage Series is an exclusive member benefit, delivering expert insights into the latest research to help you make informed business decisions.

Repercussions from the ongoing COVID-19 pandemic are far-reaching and still quite unknown, but one thing is for certain: the impact on commercial real estate will be substantial. A week ago, CRE fundamentals were solid; will that improve our recovery timeline? What do experts see for the potential future of the industry? How do you recognize a deal today, and know whether it’s better to act quickly or hold? The questions are numerous, and NAIOP is here with guidance to support you today and get you thinking ahead for tomorrow. Have a question for our speakers? Submit it now.

Speakers:
Larry Lance, Executive Vice President-Asset Services, EverWest Real Estate Investors, and 2020 NAIOP Chairman
Al Pontius, National Director of Office & Industrial, Marcus & Millichap
John Chang, National Director of Research Services, Marcus & Millichap

Click Here to Register

Industrial Space Demand Forecast

Originally published in February 2020 by Hany Guirguis, Ph.D., Manhattan College and Timothy Savage, Ph.D., New York University

The NAIOP Industrial Space Demand Forecast is based on a predictive model that forecasts demand for industrial space at the national level on a quarterly basis for eight consecutive quarters.

It utilizes variables that comprise the entire supply chain and lead the demand for space, including varying measures of employment, GDP, exports and imports, and air, rail and shipping data.

Leading indicators that factor heavily into the model include the Federal Reserve Board’s Index of Manufacturing Output (IMO), the Purchasing Managers Index (PMI) from the Institute for Supply Management (ISM) and net absorption data from CBRE Econometric Advisors.

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New Report: Office Leasing Activity to Sustain Momentum as US Economic Expansion Continues

Posted on December 6, 2019

The NAIOP Research Foundation has published the NAIOP Office Space Demand Forecast for Q4 2019.

Key Takeaways:

  • The U.S. office market continues to perform as expected, with an average of 14.7 million square feet absorbed per quarter in 2019.
     
  • The forecast for the remainder of 2019 and 2020 remains strong at an average of 13.2 million square feet absorbed per quarter in 2020 and 12.7 million square feet per quarter in 2021.
     
  • At present, the economy – and thus the office markets – are expected to remain in an upcycle for at least the next 18 months.
     
  • The effects of the WeWork situation are likely to be isolated to a small set of markets and will not broadly impact the national office market. The company's inability to expand may generate more demand for direct leases in some markets, but overall, coworking appears to be a long-term trend, and the forecast will likely resist any short-term impacts caused by WeWork's recent troubles.

Firms might slow their expansion plans in 2020, reducing the need for new office space, in reaction to overall fears of a slowdown. Still, most measures of consumer health, including wage growth, job growth and consumption expenditures, remain strong.

View the Report

The Suburban Office Park, an Aging Relic, Seeks a Comeback

Posted on November 25, 2019

By 

When Research Triangle Park in North Carolina opened in 1959, its bucolic setting was considered a major selling point. With office buildings hidden behind grassy meadows and swaths of pine forest, the quiet development was viewed as a perfect spot for the thinkers who went to work at companies like IBM and RTI International.

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New: Fall 2019 Sentiment Index

Posted on November 15, 2019

About The NAIOP CRE Sentiment Index

The NAIOP Sentiment Index is designed to predict general conditions in the commercial real estate industry over the next 12 months. The forecast is not based on an analysis of historical data, but rather it represents a look into the future by real estate developers, investors, operators and brokers. These NAIOP members are asked to respond to questions based on their ongoing work, including projects in their pipelines. For more information, see Understanding the Index.

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New Report: The Evolution of Suburban Office Parks

Posted on October 7, 2019

The NAIOP Research Foundation has published a new report titled "Profiles in the Evolution of Suburban Office Parks," by Dustin C. Read, Ph.D./J.D.

The author interviewed five developers who have recently updated suburban office parks in the United States and Canada to learn how they made these properties relevant for today's market.

Key Takeaways:

  • Redeveloped office parks must fit the preferences of the local workforce and the needs of local employers.
  • Developers should seek to understand local officials' priorities.
  • Developers should build flexibility into their plans and partner with creditors who understand that they may need to adapt to unforeseen circumstances.
  • Developers can maximize the value of their improvements by leveraging design, technology and amenities to develop a property's identity and build community.
  • Rebranding is often a critical component of a successful redevelopment strategy.
 Read the Report.

Solving the Construction Worker Shortage Puzzle

Posted on October 1, 2019

By Shawn Moura

In recent years, builders have faced a shortage of workers that has only grown more acute amid increasing demand for construction and record-low unemployment. Many of the 2.2 million construction workers who lost their jobs during the last recession either retired or found employment in other industries. At the same time, fewer new workers are taking their place because millennials are less attracted to careers in construction than past generations. Workers under the age of 25 make up only 9.0% of the construction workforce in the United States versus 12.3% of the nation’s overall workforce, according to data from the Bureau of Labor Statistics.

A report published by the NAIOP Research Foundation in July , “Addressing the Workforce Skills Gap in Construction and CRE-related Trades,” examines how employers are partnering with local communities in innovative training and recruitment programs to boost the supply of skilled construction workers in both urban and rural areas.

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Profiles in the Evolution of Suburban Office Parks

Posted on September 22, 2019

By Dustin Read

The NAIOP Research Foundation has published a new report titled "Profiles in the Evolution of Suburban Office Parks," by Dustin C. Read, Ph.D./J.D.

The author interviewed five developers who have recently updated suburban office parks in the United States and Canada to learn how they made these properties relevant for today's market.

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Industrial Demand Forecast Decreases as Economy Slows

Posted on August 19, 2019

By Dr. Hany Guirguis and Dr. Joshua Harris

The NAIOP Research Foundation has published the NAIOP Industrial Space Demand Forecast for Q3 2019.

Key Takeaways

  • The forecast for net industrial space demand has decreased amid slower growth in the U.S. economy. Absorption is now expected to average 37 million square feet per quarter for the next two years. This is a significant slowdown from the average 60 million square feet of quarterly net absorption experienced during 2017 and 2018.  
  • The average quarterly completions fell to 42 million square feet in the first half of 2019, down from an average of 54 million square feet per quarter during 2017 and 2018. Supply and demand are likely to stay in balance for the industrial sector; therefore, rents and vacancy rates should remain stable in many markets nationwide. 
  • A recession is not likely in the near term, but a general slowdown appears already underway; the first report of GDP growth in the second quarter fell to 2.1% from the 3.1% annualized result of the first quarter.
View the Forecast

Eight Things to Know About Industrial Real Estate Demand

Posted on August 12, 2019

By Gillam Campbell

Tariffs are in the air, but dealmaking continues on the ground in the U.S. industrial property market. Despite a slight softening, vacancy continues to hover at all-time historic lows. So, what’s driving the action? The following are eight things to know about demand for industrial property, according to JLL’s latest research Cheat Sheet:

  1. More tenants on the move, more locations needed. A year ago, our research showed 1,200 tenants seeking 439 million square feet of space. Now, roughly 1,600 tenants are in the market, looking for approximately 600 million square feet of space. The growing number of tenants includes not only new-to-market occupiers, but also companies that are looking to expand or replace square footage – whether  that means a last-mile e-commerce delivery center close to consumers or a more modern, flat-floor big-box warehouse that is ready for today’s high-tech distribution.
  2. Less is more when it comes to square footage. As consumers begin to expect next-day or even same-day delivery from their e-tailers, distribution strategies increasingly include smaller delivery centers, some of them in urban infill locations, that help companies cover the last mile to the customer. No wonder the average square footage requirement has shrunk by 10,000 square feet over the past year to reach 360,000 square feet.
Click here to read more.

New Report: Addressing the Workforce Skills Gap in Construction and CRE-related Trades

The NAIOP Research Foundation has published a new report titled "Addressing the Workforce Skills Gap in Construction and CRE-related Trades," by Barry E. Stern, Ph.D.

A shortage of construction and logistics workers has increased the cost of construction for developers and hampered the expansion and profitability of warehouse and distribution centers. The NAIOP Research Foundation commissioned this report to explore some of the contributing factors to the workforce shortage and how the construction and logistics industries can improve worker recruitment, training, productivity and retention.

Key Takeaways:

  • Contractors will increasingly need to adopt new technologies to improve worker productivity.
  • The most successful workforce development programs rely on multisector collaboration.
  • It is important to align workforce development programs with local trends.
  • Demonstrating that a job can be part of a long-term career is important to recruitment and retention in the logistics and construction industries.
  • The construction and logistics industries need to invest in training and recruiting high school students and recent graduates.
  • Investing in ongoing training for current employees ensures that workers have the latest skills and improves worker recruitment and retention.
 Download the Report

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.

Click here to read more and download report.