Tech is among the strongest
office sectors, but tech is also
shrinking footprints. How’s
that playing out?
With stronger job growth being a trend,
job-for-job, absorption should start
increasing for office, particularly since
development has been muted. However,
the technology arena is creating havoc
with the sector. The GSA is using much
less office space because people are
hoteling. Instead of everybody having
assigned offices or cubicles, they are
given a different desk to go to when they
arrive. We’re seeing the amount of office
use per person shrinking. People are
using the cloud, working from home or
wherever they may be. As more and more
people aren’t using them, we’ve moved
from an enclosed office to a cubicle to an
open-floor layout to an open-desk layout.
This has occurred because of technology, and yet tech is one of the biggest
growers and users of office space. They’re
also the masters of having people work
remotely. One of the fastest-growing segments is the small user, as well as medical-office users as they’re switching from
paper to electronic medical records.
As job growth finally gathers
momentum, how is CRE
Increased inventory passing through
warehouses and distribution buildings
supported additional hiring for warehouse positions. Year to date, more than
19,000 posts were created, far outpacing
the corresponding period last year. The
need to expand staffing underlines the
improving operations and near-term
prospects for the industrial property sector. Construction of new space is muted,
and growing space demand will reduce
the national industrial vacancy rate 100
basis points in 2014 to 7.1%.
Growth in office-using employment
sectors is driving a broad-based improvement in operations for the US office sector. Tenant expansions drove the national
vacancy rate 30 bps lower to 15.6% in the
first two quarters of 2014. Continued
employment growth will encourage businesses to expand footprints, boosting
space demand through the remainder of
the year while construction remains limited in most markets. As a result, the
national office vacancy will tighten further to 15.3% by year’s end.
For real estate principals
nearing retirement age, what
are the next steps?
The real transition for senior principals
is a shift a from day-to-day-execution
activities to purer asset management of a
personal balance sheet. But this nonetheless poses a succession challenge at
many real estate firms: Who will replace
the senior principals in day-to-day
responsibilities? And why is this particularly important now, as economic expansion is in full swing?
Today’s challenge is based on two simple concepts: Cycle timing and age. When
we look back across multiple cycles, we
can see that recoveries and expansions
range from five to seven years. Downturns
and recessions have ranged from three to
five years. This cycle arithmetic suggests
what we should expect.
If you assume that many of today’s
senior principals won’t want to be an
active operator when our industry cycles
into the next downturn, the succession
clock has already started to wind down.
How many senior real estate principals
would like to transition from operator to
investor on or before the coming peak?
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Marcus & Millcihap