“Even a dead cat will bounce if it’s dropped from a high enough altitude,” says an old Wall Street adage. Major economic signals reveal the office building industry is experiencing “a dead cat bounce.”
Sale prices for office buildings enjoyed a moderate bounce to the upside, following the financial crisis of 2007 - 2008. However, the recession and its legacy have vaporized an estimated 275 to 550 million square feet of demand for U.S. office space. While the carnage in the labor market has been slow to influence the office market, the aftershock is beginning to be felt across the country as tenants shed surplus office space.
This assessment comes from B. Alan Whitson, RPA, President of Corporate Realty, Design & Management Institute, and Chair of the Model Green Lease Task Force in a multipart series Office Buildings: The Dead Cat Bounce. In Part One of this series, Whitson zeroes in on changes in the labor market, how it affects demand for office space, and five trends to watch.
“Most pundits have been tracking ‘new unemployment claims’ as their indicator of choice,” says Whitson. “While this worked in past recessions, this time the key is the number of job openings. Before the recession, we averaged 4 million job openings a month. Since the recession ended, job openings have averaged 2.7 million a month. In contrast, layoffs are running 2.1 million a month slightly below the prerecession average of 2.3 million a month. With the economy short 1.3 million job openings every month, a major shake out in the office building market is occurring.”
Five trends to watch from Office Buildings: The Dead Cat Bounce - Part One:
1. Tenants are taking less space, signing short-term leases, and spending less on tenant improvements
2. At 17% vacancy nationwide, tenants are becoming more selective about the space and buildings they lease. Yet, landlords have the upper hand in some submarkets. Tenant that are willing to be flexible and creative can make can make great deals on great space
3. Well-informed building owners will get more creative about the product the offer – work environment vs. square feet
4. Look for an “Uber” class of office buildings to emerge, a combination of location, style, technology, and sustainability. Many 60s, 70s, and 80s era buildings have great locations, good architectural bones and maybe more competitive than some of the newer buildings given a smart upgrade to the skin, mechanical and electrical systems
5. While technology allows us to work anywhere, where we work is becoming more important
As the series moves forward, Whitson will address how these and other changes affect the design, construction, and operation of office buildings. The changing relationship between building owners and their tenants, the leases negotiated, and the types of office buildings tenants are seeking. The goal of the series is to identify the pitfalls to avoid and where to profit from the changes in the office- building marketplace. BD+C
Related Stories
| Dec 16, 2013
Construction materials prices remain stable in November
Overall, construction materials prices fell 0.5 percent in November and are up only 1.1 percent year over year, according to the Department of Labor’s Dec. 13 Producer Price Index.
| Dec 13, 2013
Safe and sound: 10 solutions for fire and life safety
From a dual fire-CO detector to an aspiration-sensing fire alarm, BD+C editors present a roundup of new fire and life safety products and technologies.
| Dec 13, 2013
AIA, MIT issue joint report on impact of design on public health
The research looks at the health of eight U.S. cities and lays out a path for translating the research into meaningful findings for policy makers and urban planners.
| Dec 11, 2013
Wyndham unveils hotel prototype for its Hawthorn Suites chain
The extended-stay hotel prototype reduces development costs by 46% for franchisees and enhances the overall guest experience.
| Dec 10, 2013
16 great solutions for architects, engineers, and contractors
From a crowd-funded smart shovel to a why-didn’t-someone-do-this-sooner scheme for managing traffic in public restrooms, these ideas are noteworthy for creative problem-solving. Here are some of the most intriguing innovations the BD+C community has brought to our attention this year.
| Dec 10, 2013
Modular Pedia-Pod: Sustainability in healthcare construction [slideshow]
Greenbuild 2013 in Philadelphia was the site of a unique display—Pedia-Pod, a modular pediatric treatment room designed and built by NRB, in collaboration with the editors of Building Design+Construction, SGC Horizon LLC, and their team of medical design consultants.
| Dec 9, 2013
Tips for designing higher education's newest building type: the learning commons
In this era of scaled-down budgets, maximized efficiencies, new learning methods and social media’s domination of face time, college and university campuses are gravitating toward a new space type: the learning commons.
| Dec 9, 2013
ULI: Real estate market in 2014 will be 'recovering from the recovery'
The U.S. commercial real estate market is gradually “recovering from the recovery” and will “gain momentum” in 2014, according to ULI CEO Patrick L. Phillips.
| Dec 9, 2013
What is life cycle cost optioneering?
Life cycle cost optioneering is a way of assessing alternative design options, analyzing their long-term capital and operational costs to identify those with the lowest price tag, over the entire life cycle.
| Dec 6, 2013
French concert hall includes integrated musical elements [VIDEO]
La Métaphone, a concert hall in Ognies, France, is a 1,980-sm facility with the unique characteristic of being a structural musical instrument. The solar-powered building incorporates musical elements in its walls, which can be played by musicians inside or outside the facility.