CoeoSpace provides its “take” on Cohesion’s blog titled “Want to improve your building’s indoor air quality? We’ve got the solution.” CoeoSpace then further explores what will bring office tenants back to their office space.
Learn more here about how to bring employees back to enjoy the workplace!
Is commercial office space for lease “dead”? What will allow employees to feel safe?
At CoeoSpace, we are seeing tenants making indoor air quality or “IAQ” a key consideration in determining which commercial office space to rent. Because air quality will impact when employees will feel safe enough to return to their workplace, this is critical. Cohesion, a leading-edge company, headquartered in the Windy City of Chicago, that provides a smart building platform for commercial real estate, discusses in How to Improve Air Quality the importance of indoor air quality (IAQ) for office workers.
We agree 100% that a building’s air quality is an important topic. Because, it concerns every worker. Solutions range from the old-fashioned method of opening the windows to new technologies for air flow and circulation. Returning employees are also interested in other wellness and sanitation features. Specifically employees are now focused on:
The cleaning schedules for the lobby, elevators, shared tenant spaces.
The property’s social distancing policies.
Touchless doors, elevator cars.
Population control in high traffic and high visitor areas such as the lobby or fitness center and regular reporting so trends can be understood.
These new policies and technologies focused on the health and wellness of a building and a space have become paramount. However, we anticipate that future occupants still hold a high priority for:
Indoor parking and convenient or free parking.
Café’s and shared tenant areas.
And perhaps even basketball courts, bowling alleys and recording studios.
A Fantastic Example of Office Space for Lease in Chicago
One fresh delivery in Chicago’s West Loop CoeoSpace – Find Space. Share Space. Promote Space is 1201 West Lake Street. Because of all it offers, CoeoSpace’s Co-Factor gives this building a Platinum rating. In addition to premium amenities and quality, the property is in an amazing location. This office building offers exceptional options on every level from ground floor retail space to many office space choices. From a beautifully done, move-in ready office suite for 70 -80 people to spaces to design and build your own space for up to 24,000 square feet can be found here. So, it’s a great find for someone looking for state of the art space, top air quality, best in class management, and many amenities.
Hybrid Office Space?
CoeoSpace is hearing that the “hybrid” workplace will be the new world order. Because, employees are seeking “choice” or the freedom to work where they feel they can be the most productive. However, the details of how this will work is still unclear to most business leaders. So, workplace design will and should now be focused on health and wellness elements. This will allow their employees to feel safe and supported.
Over 80% of office workers want to get back to their office space.
Most humans that CoeoSpace has spoken with do not believe that complete remote working is an effective long-term strategy. Because “people need people” to collaborate and be creative and isolation hurts companies growth potential. So, the five day a week commute into the office seems to be a thing of the past for most companies.
The CoeoSpace prediction on back to the office.
We predict that in addition to office buildings becoming wellness oriented, that tenant workspace and design will evolve to support a company’s culture, brand, and employee engagement goals. Office space will now be created to meet employees “where they are and where they want to be.” So, we envision tenant spaces of the future will incorporate amenities such as a meditation room, socially distanced collaboration rooms, employee lounges and even sanitation stations for IT equipment. And, perhaps even a “mudroom”! As mudrooms are commonly cherished in many homes as the place to leave the dirty items until they are cleaned.
No one really knows what the office will look like post-pandemic. So, now is the opportunity to reimagine how space and buildings can evolve to maximize productivity. Also, how the office can improve an employee’s quality of life and ability to choose how and where they work. I believe the possibilities are boundless.
And that’s our take at CoeoSpace. Thank you Cohesion for opening the space for this important and timely discussion.
Are all Commercial Real Estate brokers or agents the same? Do I really need a broker or can I do it myself? These are very important questions that must be answered for every type of business as one chooses a commercial real estate broker at various stages of a company’s lifecycle.
How to pick the best commercial real estate broker whether you are a Fortune 100 Company or a start-up, whether you seek new warehouse space in an industrial park, a sleek downtown office or a fun loft for your millennials, is a decision that must be made wisely. Are all brokers the same? Does it matter who you select to represent your firm? Yes, yes it does! Of course it does! Very much so.
Making this decision can set the stage for real estate being an asset that either helps propel your business forward or becomes a noose around your neck. Selecting the right office space, industrial space, retail space can make or break your overall business.
A space that reflects your culture and becomes a place where employees enjoy spending their time can be an irreplaceable source of collaboration and creativity. An office space that lacks flexibility may hinder your ability to attract talent. Or a space may simply cost too much money and then simply it is a drag on the bottom line.
A Commercial Real Estate Broker is not a “one size fits all” commodity. I can assure you that brokers are quite different from each other in terms of the level of service they offer, the resources they bring to your project, and the advice they provide to get you to the point of decision on your space.
After spending over two decades in the industry as a broker, consultant, and service provider, in my professional opinion, I believe that there are 5 key factors to consider when you are ready to select a commercial real estate broker to represent your interests and find you the ideal home for your new office, industrial or retail space for your operations.
The first and most important factor in my opinion is somewhat intangible…this factor is chemistry. Do you trust the commercial real estate broker or agent and their team? Do your instincts tell you that they have your best interests at heart as their driving force? The reason why chemistry is so critical is primarily due to the lack of alignment in the way in that brokers are compensated for their services. This is an area of commercial real estate where there is a lack of transparency. By becoming knowledgeable about the track record and reputation of your potential broker you can get a head start on a great decision. Most brokers can become your strongest asset and most are highly ethical but there are some “bad apples” as in any space.
A Commercial Real Estate Broker is paid a commission by the Landlord or Seller of the property your company ultimately selects and often the fee is a percentage that is tied to how much space you occupy and the length of the term of your contract. To illustrate, a very common lease commission calculation would be calculated using this formula: 4% x 5,000 square feet x 3 years x $25 per square foot in rent. In this example the fee paid by the Landlord to your broker would equal $15,000. In some markets the calculation is simply a set amount multiplied by the number of square feet. For example, in Chicago, it is $1.25 per square feet x 5 years x 5,000 square feet for a total commission paid of $31,250. As you can see, the commission owed to the broker who represents your interests is often tied to how much your space costs you or how many square feet you occupy. To further complicate this, some properties offer a “bonus” commission for your contract (which not all brokers disclose). I believe this bonus should be disclosed by the broker to its client but that is left to the broker’s discretion. You want to work with a broker who is transparent with you and of course, who would not be swayed by any bonus. Most brokers are ethical and will provide this information but it never hurts to ask.
Commissions for both the tenants representative and the landlords representative are expected by most commercial properties and therefore, built into the pricing of the property. If you don’t use a commercial real estate broker, you are likely leaving money on the table and foregoing valuable expertise that could provide you with a better space solution with more flexible terms at a lower cost.
Commercial real estate is one of the few remaining industries where you can’t easily shop prices or availability online to see what is being offered and then make a strategic decision with open information. You are relying, almost solely, on the information provided to you by your broker. A good broker must be detailed oriented, thorough at understand the market, able to understand your business and a master negotiator. This takes a unique type of person!
Lisa McClung, CEO of Coda Signature added what is fundamental to her, “The broker taking the time to understand my goals and business strategy…that the transaction is a means to an end. Less sophisticated brokers are focused on the timing of the transaction and fees – because that is how they are compensated. Brokers who understand my business and align with my timing are the ones that become long term partners and are always my first call for any future transactions.”
The second key factor is the broker’s overall qualifications and references. Do they have happy and satisfied customers? Brokers often specialize in the type of building you seek (office, industrial, retail). Each of these asset groups are very different in terms of market knowledge and specifics. For example a strong retail broker will understand the demographics and traffic patterns, a strong industrial broker will be knowledgeable in terms of rail access, value of various ceiling heights, and cross-dock buildings whereas an office broker would be able to advise on where and what type of space will help you attract the right employees and retain them and what term to commit to for your company. For example, if you are making a leasing decision for a fast-growing startup, a short-term lease might make sense even if there is a premium cost. Brokers that specialize in start-ups can be instrumental in helping you think through various options tied to flexibility that will have a long term impact on your company .It is critical that your broker have deep experience with completing successful transactions for like-type companies. “Market knowledge AND the willingness to understand that every deal is the most important deal to THAT client,” is crucial criteria as summed up by Duke Long, Owner of Duke Long Agency, EIR Second Century REACH.
Third, is the broker a good listener who truly understands your needs? Listening skills are important for any consultant however, with your broker this is critical as you can waste significant time looking at properties that do not meet your needs. While much of the commercial real estate process can be done in advance through virtual viewing often, it is important to physically visit a number of spaces before you commit. Many brokers will view this as “time with their client” while you will likely view it as valuable time away from growing your core business. Therefore, an expert broker who listens and understands that you value your precious time is a key factor.
Resources of the firm is the fourth key factor. In addition to having a great broker, does the firm also provide construction and project management services to assist you with your construction budget and to manage the buildout of the space? Perhaps you want to consider locating in the suburbs versus a downtown location. Having a firm that has strong representation in both areas would be critical so that you get complete information. Furthermore, a firm that has a labor and demographic expert, and even an incentives expert (often municipalities will provide tax incentives to companies that provide new jobs or even retain jobs that would otherwise move elsewhere) might be even more significant in determining the best solution for your company.
The fifth and final factor to consider has to do with the reputation of a broker’s firm. What type and size of firm should you consider? Do you need a global, well-known marquee brand such as JLL or CBRE Global, a mid-sized player or a niche, boutique firm? Is their brand value important to you? These firms all have quality advisors. However, doing research on the firm, their focus, and resources, can be another factor to help determine who and what firm is the right fit to meet your objectives. Some firms are full service and provide all imaginable real estate services from property management, project and construction management, leasing and investment sales while others are niche firms only providing services that serve the tenant OR the Landlord. Regardless, it is important to make sure the brokerage firm has all the services that you will need from the search to the build out of your space to and post lease services you may require such as operating expense and tax audits. There really is no place to go and compare firms so it’s critical that you consider all these factors and do your own homework.
If you get the right broker on your team working hand in hand and as a partner with you, you will be fully informed on the market dynamics and will likely get much improved economic terms than you would on your own or with an unqualified broker. You could even be out touring properties that meet your needs in a matter of days from this decision being made. The full leasing process can be as short as 3 months, or if you want to take more time to design custom space, the process could take a full year or more. Additionally, as commercial real estate is now adapting to the digital world, more information is becoming available to companies that includes virtual tours and 3D imaging, which all can assist to accelerate the process. Therefore, this process with the help of a savvy broker should become much more customer friendly and open.
My recommendation is to meet with and consider a minimum of 3 and a maximum of 6 firms. While some larger firms will include up to a dozen firms, this is not necessary and is a waste of your precious and valuable time. By applying these 5 key factors to select the right broker for YOU, your company will be set up for success.
Securing the confidence that your broker is partnering with you to further the success of your company does not have to be intimidating and does not need to happen in a black box. Selecting the broker that best meets your needs will result in identifying space that is aligned with your firm’s personality and culture and will positively impact your firm for years to come.
Written by: Sheila Samii Matuscak, CEO & Founder, CoeoSpace
Despite the extraordinary challenges of 2020 including the global pandemic, the election and the economic uncertainty that came from both, industrial property sector fundamentals are encouraging. Industrial space for lease is in extremely high demand. According to Statistca Research Department the national vacancy is at near historic lows and the lowest of the commercial asset classes with a 10% vacancy rate. E-commerce is the most significant driver of demand. This demand has surged since the beginning of the pandemic. CoeoSpace predicts that this demand will only increase in 2021. Therefore, this is amazing news for industrial owners and investors!
Why is Industrial so solid now?
Even on smaller industrial assets tracked by the National Association of Realtors (NAR/REALTORS®), as reported in their Commercial Real Estate Trends & Outlook, July 2020 Report, the industrial market is the strongest of the commercial real estate sectors given the expected continued and constant growth in e-commerce. The trend toward online shopping and delivery is not likely to end anytime soon or ever.
The “Amazon effect” is often credited for the strength of industrial real estate and has become well known terminology. What is the Amazon Effect you ask?Well, Investopedia defines The “Amazon effect” as the impact created by the online, e-commerce or digital marketplace on the traditional brick and mortar business model due to the change in shopping patterns, customer expectations, and a new competitive landscape. So, Amazon delivery has become a new normal for a significant portion of American households. As a result, the Amazon effect has fundamentally and permanently changed how consumers buy product and their expectations for delivery which is “why wait?”. I love to buy product immediately when I need it. I’m sure you do too!
The pandemic has also led online grocery to explode as many households who had never before ordered online, now use it regularly. So, this trend is expected to continue post-pandemic. CBRE estimates that cold storage facilities alone are likely to grow by as much as 100 million square feet by 2025 which is a 47% increase from the current 214 million square feet (NAIOP, The Cold Storage Market is Heating Up, Spring 2020 Issue).
What is BOPIS for industrial space for lease?
In addition to e-commerce, the pandemic has led to a burst of BOPIS (buy online, pick up in-store). BOPIS will become a well-known acronym. As consumers become more familiar with the ease and convenience of this delivery method, they will demand BOPIS.
Through our own CoeoSpace database, we have seen significant industrial product get leased in the past 6 months. This is amplified in strong industrial markets including Chicago, Houston & Dallas. The largest industrial markets including Inland Empire, California and Eastern Pennsylvania/Southern New Jersey continue to grow. These markets are completing record new constructions projects.
2020 Year End Projection
2020 year-end absorption is likely to be 200 million square feet. Because, new product delivery is at an anticipated all time high. This is likely to reach just over 100 million square feet based on most major industry players’ research. There is plenty of new construction underway. And the demand for well-located, well-built industrial space is currently almost keeping up with this supply. This balance will be important to watch.
2021 Outlook and Beyond
It seems clear that we will continue to see the growth of e-commerce and direct-to-consumer delivery channels for the foreseeable future. As depicted below, JLL projects growth of over 1 billion square feet of industrial space by 2025 as developers and investors are ready and eager to meet the continued demand.
These new construction projects will be state of the art, high tech industrial space. This will allow occupants to leverage artificial intelligence, machine learning, robotics, and drones which will allow them to maximize all links in the supply chain.
Industrial commercial real estate is clearly the asset class to watch…
Sources: JLL, CBRE Global, Cushman & Wakefield, NAIOP, Statistca, National Association of Realtors (NAR)