Thomas L. Campenni, Broker, and Thomas F. Campenni CPM CCIM represented both Owner and Tenant for the renewal of 60,000 square feet of office space at 21 West 46th Street to Workhouse 46 LLC, a co-working company, for another 12 years. Workhouse 46 LLC also leased an additional 7,000 square feet at the property in the heart of Midtown Manhattan. The aggregate rent over the term of the lease will be $35 million dollars.
Trends in Commercial Real Estate
Wednesday, January 8, 2014
As 2014 begins, our commercial real estate market continues to improve. While there is no other business as local as real estate, the national trends from absorption rates to the rental rates are all showing that they improved in 2013 and will continue improving in the new year. This is a relief after the depressed market of several years ago.
While current trends do show the market on an ascending climb, no one should become overconfident in this still-fragile economy. Developers must not flood the market with new product since it is essential to maintain equilibrium with users' ability to absorb the commercial space coming on line. At the same time, while rents have steadily risen, there is only so much of an increase tenants will be able to pay.
Long term trends would suggest that demand for all forms of commercial space from retail to office to industrial will not increase as rapidly going forth. In the past, when the economy continued to improve, the level of demand for space would correspondingly rise. I don't think the demand for space this time will be as strong. The difference will simply be a function of the changing nature of the work place.
Coming out of the "Great Recession," most individual businesses and industries have rethought how they operate. Even before the downturn, we saw the reduction of office space per person and even the elimination of individual desks for many employees. This trend will continue as tasks once done in-house are either outsourced or accomplished by employees working remotely.
In the past decade, technology has created viable and highly productive ways to work from home or some other offsite, remote location reducing the demand for traditional office space. It is possible for employees to work at home and have their productivity monitored in real time at the headquarters location. Employers now know when computers at a home office are turned on and what employees are doing at any given time. Phone calls can be answered at a company's location and sent on to the employee as if he/she were in the next office.
Not only has there been a revolution in how office work is accomplished but there have also been dramatic changes in the manufacturing sector. With computerization, the vast factory floors teeming with semi-skilled workers have been redefined. Now one person in a control room can monitor robots making products. And with the introduction of 3D printers on the factory floor and increasingly in offices, parts can be manufactured in the location where they will actually be used instead of having to be shipped from around the world. Prototype components can be evaluated and adjusted is a matter of hours not weeks. This allows for a rapid response to innovation that was not possible even a few years ago.
These trends not only impact the amount of space needed but also the type of space. In coming years, a building will face technical obsolescence at a much faster rate than in the past. The design of the building must take this into account so that systems can be altered and replaced to maintain the functionality of the property in this rapidly changing landscape. The owner and property manager must be aware of these and other technical developments to be successful in the future.