While industry fundamentals are healthy and the economy is strong, the U.S. office sector faces pressures that could fundamentally alter its business model. Jeff Adler and Jack Kern, vice president and director of institutional research, respectively, for Yardi Matrix, provided an update on a sector in transition in a recent webinar. After a shaky fourth quarter of 2018, the U.S. economy has rebounded into “really good shape,” Adler said, with a rising stock market and inflation that is largely held in check by increased domestic oil production. The labor market is very tight—the best in 50 years, he said—with office-using sectors outpacing overall job and wage growth over the past five years and most markets absorbing available office space. Metros such as Dallas, Houston and Atlanta are growing fast and adding office-using jobs. Other locations with job growth and low unemployment, such as Orlando, Fla., Nashville, Tenn., San Francisco and the nearby Bay Area, have to import workers to meet staffing needs. Most markets still have room to absorb office space. In short, the industry is in a good place, and if the federal government’s pro-growth policies outweigh its anti-growth ones, “the party goes on,” Adler said. So what are the challenges? One of the main secular (long-term) factors is coworking, which pulls 1-3% of market demand from traditional office leases and keeps growing as companies expand beyond their primary locations. The practice is growing everywhere and won’t likely go away anytime soon, Adler said. Per-employee square footage is decreasing, particularly in central business districts and high-cost metros. With a tight labor market, companies are luring talent by making office “an experience-driven sector,” similar to what has happened in retail, incorporating design elements and attractions such as new technology, spaces for relaxation, natural light,...

Coworking isn’t new, but its recent growth and prominence in the U.S. office market space is. A new special report from Yardi Matrix, titled “Shared Space: Disrupting the Traditional Office,” outlines the dramatic increase in shared spaces over the past year, driven by a growing “gig economy” and employers’ desire to deploy more workers remotely, attract talent and gain more flexibility for their space. In researching 20 metros, Yardi Matrix found that 43.5 million square feet of office space was being rented as of the fourth quarter of 2018. This represented a 62% increase in shared space over the previous year and 1.7% of the total inventory. The business model for shared space is evolving to match the practice’s growth, with landlords and brokerage firms offering more amenities and flexible lease arrangements. Coworking has gained footholds in both urban markets (2.2% of stock) and suburban submarkets (1.2%). The practice is “growing as a percentage of office stock in all areas, but it is a more natural fit in urban settings due to the proximity to a greater number of workers, easier commute to urban locations and greater availability of small rental spaces in suburban areas,” the report says. “The sector is in a nascent phase, so the pace of growth is likely to pick up in coming years.” Manhattan, N.Y., ranked first in both overall amount of shared space with 13.7 million square feet, with Los Angeles second with 4.7 million square feet. The borough also had the most shared space as a percentage of total stock, 3%, with Portland, Ore., Miami, San Francisco and Austin, Texas, totaling 2.5%, 2.4%, 2.3% and 2.2%, respectively. Read the full Yardi Matrix special...

No longer the sole domain of freelancers, micro busineses and start-ups, coworking is taking the Asia Pacific by storm as large companies jump on board the trend, says Yardi’s Neal Gemassmer. According to research by Cushman & Wakefield, coworking has accelerated rapidly throughout the Asia Pacific region, with roughly 750,000 sqm of space leased over the last two years alone. America’s largest coworking company, WeWork, now has 300 offices in 62 global cities, while China’s Naked Hub and Ucommune are also making waves around the region. Gemassmer, Yardi’s vice president for international business, says demand from corporates has been the one of the biggest coworking drivers. He points to research from Cushman & Wakefield, which finds the number of coworking enterprise-level companies – those with more than 500 employees – has doubled in the last 12 months. Meanwhile, the share of freelancers and independent workers has dropped by nearly 15 per cent over the last three years. “Large companies are on the hunt for space that is flexible, that enhances collaboration, and that fosters a creative culture – all characteristics of a coworking environment,” Gemassmer says. So, what are the three coworking trends to watch in 2018? Innovation acceleration “An innovation culture is an essential ingredient in a modern workplace, particularly as disruption continues to drive many companies out of business,” Gemassmer says. “Nurturing new ideas is critical to any company facing industry disruption.” Google has established community hubs, which it calls “campuses” to cultivate a community of entrepreneurs. Coders and creatives, innovators and investors can work together while locals catch up for coffee. Similarly, Unilever has set aside an entire floor of its regional headquarters in Singapore for start-ups to set up shop, and for its own team members to connect. “Coworking can...

The year 2017 marked the largest growth in coworking, and produced all-time highs in number of spaces as well as number of members. As the industry grows and evolves, what are some of the major Coworking trends to look for in the next year? Here are five trends that will shape the continued expansion of coworking in 2018. Increasing Demand It’s estimated that 50% of the population will be working independently by 2020. If this comes to fruition, the demand for shared space will continue to rise at a fast pace in the next year. According to some estimates, there could be up to 37,000 Coworking spaces worldwide by the end of 2018. Those interested in joining the movement see that Coworking has become a symbol of community, connectivity, efficiency, and networking. Not to mention it’s a cheaper alternative than leasing in a traditional office space. The demand will only continue to increase in 2018. Health Another trend we could see in the coming year is the value placed on health, both mental and physical. Sure, we’ll continue to see the added benefits of some Coworking locations such as workout spaces and yoga classes. But mental health has been brought to the forefront and working from home, or even in some traditional offices, can create isolation, among other negative factors. Today’s society is searching more and more for the positivity of community, a huge benefit of coworking. Larger companies Coworking spaces tend to gear toward small businesses, freelancers, and entrepreneurs. However larger companies have started to pick up on the trend and realized the added value of working in cross-functional teams instead of in more traditional set ups.  Not only does working within a coworking space offer corporations a more cost-effective alternative to test new...

CBRE recently released the Spring 2017 North America Suburban Office Trends Report. Econometric advisors foresee positive net absorption and rent growth will continue throughout suburban office markets in the United States. A handful of cities stand out for their growth. For more than 27 quarters, the U.S. suburban office vacancy rate has refused to rise. Sluggish new supply in major suburbs cannot keep up with increasing tenant demand. Even suburbs that were slow to recover from the recession are now showing luster.  CBRE reports that several Florida markets, Milwaukee, Phoenix, and even Detroit posted year-over-year vacancy rate decreases of 200 bps or more in Q4 2016. Submarkets that cater to thriving industries, such as technology, stand to benefit the most from this trend. Major suburbs that offer energy efficient spaces and top-end amenities will also do well. The following 10 markets are slated for success throughout 2018. Suburban Atlanta Increasing by 10.1 percent, rates for Atlanta office space for rent ended 2016 at an average of $22.47 per sq. ft. Atlanta Business Chronicle reports that some areas of the metropolitan area just made history by breaking the $50 per foot barrier. Cambridge, Mass. The vacancy rate declined by 180 basis points by Q4 2016, ending at 3.8 percent. The average price came in at $65.26 per sq. ft. The new city of Cambridge has grown in large part due to the presence of technology powerhouses, Microsoft and Apple. The presence of academic professionals, employees of Cambridge Innovation Center and WeWork also contribute to the high demand for office spaces. Suburban Fort Lauderdale, Fla. At the end of Q4 2016, the suburb yielded 8.3 office rent growth, at a price of about $29 per sq. ft. New construction and the conversion of some retail spaces...

With the rapid development of the green building movement and the integration of tech solutions into all sectors of real estate, we are currently witnessing the rebirth of the modern workplace. White walls and blunt office spaces have been replaced with nurturing environments focused on sustainability, livability and cost-efficiency. Architects, designers and developers are working hand in hand to promote environmentally-responsible construction and have begun delivering innovative products that reshape the way we perceive the world. Spectacular roof gardens, green walls, natural ventilation systems, solar panels and soothing recreation areas have become regular components of the new-generation workplace. On the same note, major employers around the globe are trying to define the right mix of features to drive both people and asset productivity. Beyond social responsibility and ethical considerations, there are many pragmatic reasons why incorporating sustainable practices into a business is a good idea. Investing in green enhancements can produce measurable financial gains such as increased property value and rental rates, decreased operating costs, reduced risk of depreciation and higher attraction and retention rates. Dallas-based Gaedeke Group is strongly dedicated to reducing carbon footprint and has been aggressively pursuing LEED certification portfolio-wide. Gaedeke’s Regency Plaza (pictured, right), a 16-story multi-tenant office building in Uptown Dallas, has achieved LEED Silver certification through the U.S. Green Building Council’s LEED for Existing Buildings program. Among several features promoting sustainable construction and design, the facility earned exemplary performance points for a solid waste management program for durable goods. High tenant participation in Gaedeke’s year-round e-waste recycling days for computers, phones and other electronic devices yielded high scores as did changes to plumbing fixtures, which resulted in a 42% savings in annual usage. Along environmental concerns, the need for digital and more user-friendly technology dictates many of the...

Make your workspace brighter, better and more productive. Design an office space that fosters productivity, encourages creativity, and promotes the health and well being of all who enter. This holistic approach to an otherwise function-driven space could be the change that you need to breathe fresh air into your business and boost the morale of your team. Create the right frame of mind Your office is more than a space for meeting clients and handling paperwork. It is the environment in which you and your staff live for a significant portion of the day.  Create a space that feels livable without detracting from your professional goals. Integrating biophilic concepts into work places has proven to increase employee productivity, happiness, and health. Of course, that isn’t as easy when operating in an existing property. Retrofit the office from the inside out with a nature-inspired makeover. Create a fun, organic space like the Open AD office green house by replacing faux plants with their real equivalents. Opt for energy efficient, low-e windows with insulation instead of window coverings. By removing window coverings and permitting natural light to enter, workers can thrive in a more natural feeling and dynamic environment. In urban settings, accomplish a similar look and feel on a smaller scale using Domsai. Each mini-greenhouse is compact, easy to maintain, and adds a fresh, airy feel to your office. Optimize available natural light while conserving a bit of privacy with transparent or translucent room dividers. Opt for organic curves for a more natural effect. Create a healthier work environment with Grabo Acoustic Flooring. The flooring’s primary function, noise control, still sits center stage. As an added bonus, the flooring offers antistatic and bacteria resistant properties for a healthier workplace. Lighting doesn’t have to be purely...