impacts of changing demand for office space
DESCRIPTION
Tech and Communications Innovation, Younger Workforce and Cultural Changes, Changing Workplace Strategy, Cutting Costs, Gen X, Gen Y, Millennials, flexible work hours, recognition, social work environment, cool, creative and inspirational space, urban, collaboration, flexibility, streamline operations, corporate real estate managers, overhead expenses, efficiency, less space per employee, coworking, shared workplaces, location, leases, sustainability, supply, demand, renovation, construction, futureTRANSCRIPT
Workplace Revolution:The Impacts of Changing Demand
for Office Space
Appraisal Institute Symposium
March 22, 2014Peter Carlston
Peter CarlstonCEO | Principal Broker
801.948.0899 | [email protected]
100 S. Main Street, Suite 609Salt Lake City, UT 84101www.elevationre.com
Sources
• Commercial Real Estate Brokerages: Colliers International, CBRE, JLL, Commerce CRG
• MIT• NAIOP• Urban Land Institute• CCIM• Appraisal Institute• CoreNet Global• Vendors and Consultants:
Steelcase, Others• EDCU, Utah GOPB• Wall Street Journal, New York
Times, Forbes• Glassdoor.com• Appraisers• Developers• Corporate real estate
directors and clients• University of Utah• USGBC
First, a Story
Site selection: Any office park will do, good freeway access
Site selection: Must be close to CalTrain station and hip urban core
Today’s Presentation
• Drivers of Office Demand• Current Trends• Implications for Value
Drivers of Office Demand
• Tech and Communications Innovation
• Younger Workforce and Cultural Changes
• Changing Workplace Strategy
• Cutting Costs
Driver: Innovation
• Industrial Age to Knowledge Age• Technology and Communications
Driver: Innovation
Driver: Innovation
Driver: Younger Workforce
• Gen X: mid-60’s to early 80’s • Gen Y / Millennials: 1978-1989 or 1977-2000
Boomers Gen X Millennials0
102030405060708090
Gen X vs Gen Y
• Gen X: Latch-key kids
• Gen X: Radicals
• Gen Y: Most parented generation in history
• Gen Y: Happy conformists
Millennials
• SUPER-Confident (all those trophies)• Crave feedback• Want stimulating, social work• Less materialistic – it’s about Experiences …
and then Sharing Them• Highly educated, technologically savvy and
ambitious• Connected
Millennials
At the workplace, Millenials want:• Flexible work hours• Recognition• Social work environment• Cool, creative & inspirational space
Millennials
• Space is PLACE; key to culture and brand• Vital for attracting and retaining talent!
Driver: Workplace Strategy
• Increased need for collaboration and flexibility
Driver: Cutting Costs
• Pressure to minimize costs and streamline operations
• Corporate real estate managers focus on cutting fixed overhead expenses and increasing efficiency
Current Trends
• Less Space per Employee• Need More Flexibility• Open Floor Plans for Collaboration• Shared Workplaces: “Coworking”• Location As Important As Ever• Smaller Leases• (New buildings and efficiency / style
renovations)
Trend: Less Space per Employee
2010 2012 2017 Beyond0
50
100
150
200
250
Trend: Less Space per Employee
• Filing space has shrunk from 15 to 20 percent of office space to around 2 to 3 percent in many cases today
Trend: Greater Flexibility
• Flexibility is a necessary strategy, no longer a perk
• Essential to employee retention• American Express:– Hub– Club– Home– Roam
Trend: Greater Flexibility
• Aetna:• 35,000 employees• 14,500 do not have desks at Aetna• Policies impact 47% of workforce• Rid of 2.7 million square feet of office space• @ $29/sf, company has saved about $78M per
year!
Trend: Greater Flexibility
• Yahoo• “A few years ago it was bring your own device
to work, now it's bring your own [butt] to work.”
• Collaboration, not telecommuting, is the goal• Innovation doesn’t happen in isolation
Trend: Open Floor Plans
• “I” space to “We” space• Allocate workspace to issues instead of
people
Trend: Open Floor Plans
Trend: Open Floor Plans
Trend: Open Floor Plans
Client Case: Color Labs
Client Case: Color Labs
Trend: Open Floor Plans
• Backlash!• High Stress• Conflict
• High Blood Pressure• High Staff Turnover
Trend: “Coworking”
Trend: “Coworking”
Cushman & Wakefield | Commerce to Bring First Shared Executive Office Building to Park City
Trend: Smaller Leases
Trend: Smaller Leases
Demand and Supply
Trend: Location Matters
• Color• “Accelerated Serendipity”• Near cultural amenities• Near transit options• Premium locations still matter• “The City”
Trend: Sustainability
Trend: Sustainability
• “’Embracers’ have better stock prices, better revenue growth, better everything.” MIT
• Economics• 20,000 sf @ $18/sf = $360,000• 15,000 sf @ $20/sf = $300,000
Implications for Value
• Lack of standardized, conceptual approach to valuing green buildings
• Green premium data of limited use to appraisers
• Brown discount unaddressed• Limitations of DCF-based valuation approach
Implications for Value
• Office Demand• Opportunities• To Be Competitive• How Much Space Needed?• Future Space Needs• Other Factors Impacting Demand• Parking
Case Study: Adobe
• Campus helps Adobe win the "talent war“• “Cross generational“ workforce• Space demand is a pendulum• What's more efficient, more sf per work space
or more meeting rooms and amenities?• Timeless look outside, modular inside• All about flexibility and variety.
Case Study: 222 Main
• 426,657 square feet• Completed in December
2009 at a reported cost of $125 million
• Designed by the international architecture firm Skidmore, Owings & Merrill
222 Main
222 Main
• SILVER LEED CERTIFICATION • High performance glazing designed to provide daylight
harvesting• Designed to operate 15% below the State of Utah energy
code• Ability to integrate green technology within individual
tenant space• Building located in a developed urban area with access to
existing infrastructure• Portable water use for landscape irrigation & internal use
reduced by 50% and 40% respectively
222 Main
Tenants• Goldman Sachs• Brinks Hofer Gilson and Lione• Holland & Hart• CBRE• Hamilton Partners
222 Main
222 Main
• KBS Realty purchased for $400/sf, record-breaking price in Utah
• Key reasons for KBS purchase:– building’s first-class finishes;– views of the Wasatch Mountains; – key location in Salt Lake’s central business district;– parking facilities; and its – proximity to TRAX and City Creek shopping mall.
222 Main
"This proves that an outsider can come in from out of state and build a Class A building, lease it in bad economic times, and sell it at record-breaking number for a profit.“- Bruce Bingham, developer of 222 Main
Thank You
Peter CarlstonCEO | Principal Broker
801.948.0899 | [email protected]
100 S. Main Street, Suite 609Salt Lake City, UT 84101www.elevationre.com