A Look Back At 2013
January 02, 2014
As 2013 is in the bag, I’ve been reviewing the trends that have affected the commercial real estate marketplace and pondering the landscape for 2014. It’s my belief that we are entering a new era in this industry, one that will continue to be shaped by these forces:
- The economic recovery is increasing demand for commercial space of all types. Both occupancy rates and rents are rising in markets in every region of the country. This trend should accelerate as the economic recovery gains strength. Companies are relocating manufacturing facilities back to the US as costs continue to rise in Asia, increasing the demand for manufacturing space and office space, too.
- The increase in demand, however, is tempered by one of the trends that we have been examining over the past few months: technology is decreasing the amount of square footage required across every industry. Today, employees occupy 20% less office space than just a few years ago, resulting in less occupied office space in the middle of an economic recovery.
- Sustainability has become main stream. Commercial tenants want to lease space that is energy efficient to lower their cost of operation. Many corporations have policies that require LEED compliance, not to mention the federal, state and local tax credits and incentives that are intended to reward sustainability. Workers are embracing efforts to reduce waste of all types and expect the company they work for to do the same.
- The move away from US cities that started in the 1920’s is being reversed. Many forces are fueling this trend, including the availability of affordable housing, public transportation and the appeal of access to entertainment and cultural amenities. This is not just a trend among the young. More and more baby boomers are finding that a suitable urban neighborhood has more appeal than moving to a small town as they approach retirement. Today, it’s increasingly common for companies to purchase and renovate a facility in an urban center were they have access to space, infrastructure and a diverse workforce that includes both young workers and experienced professionals.
Overarching all of this is an accelerating rate of change that affects commercial real estate decision making. Instead of delegating the planning process to a once yearly forecasting session, smart companies today are paying constant attention to the rapidly changing marketplace.
As we move into the new year, is your company fully aware of the trends and forces that will affect your real estate needs in the coming months?
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