Trends and Insights
October 10, 2022
4 min read
You don't need to let your office building die.
Craig Baute
Author
Class B and Class C buildings are getting hit the hardest with lower rental rates and increased vacancies. While we were at the Global Workspace Association conference last month both CBRE and Avison Young researchers declared office buildings as an ‘un-ivestable asset class’ until prices drop 20 to 40%. This shock me and others in the crowd, but their reasoning was sound. A coworking space owner with 40 locations that buys buildings backed up their statements describing how zero banks offered them a loan on two buildings they were looking to buy; they usually get six to 10 loan offers within 24 hours.
Everyone agreed that as companies shift to a hybrid work arrangement, they expect companies to need around 30% less space than before. However, this doesn’t mean they want to save money; they want to make the space a higher quality and unique experience. Commercial real estate is going to be a flight to quality, or at least a flight to uniqueness.
You don’t need to let your office building die. You do need to be entrepreneurial to protect your assets.
This means you will have to break the old way of doing things. The transition could be painful for a few months, but it means your building will hold it’s value and generate cash flow faster. You’ll need to build out offices, experiment with a podcasting or video studio, and brand the space so it’s more of a destination versus a utilitarian building. Don’t worry; it doesn’t take much to stand out because the other property owners in your area are stuck in the old ways, have hung a ‘For Lease’ sign, and are waiting for someone to call.
You are building something people want and inviting them to join.
We have worked with dozens of Class B and C owners throughout the US ranging from the suburbs of Denver, to small towns in Michigan, and strip mall owners of California to help them a data-driven approach to adding coworking to their properties. It drives higher revenue and lowers vacancies by building spaces based on people’s changing habits and sparking creativity in cost-effective and fun ways. This means adjusting the floor plan, removing eggshell walls, and making the space something people tell their friends about.
Protecting your 20 to 40% of value doesn’t have to be expensive. It needs to be what people want.
Our goal is to ensure build owners don’t waste a bunch on remodeling a space that people don’t want or wasting months debating which software to use. We make sure decisions are made fast and based on experience and data.
Are people looking for 150 SF offices or cozy 80 SF with access to a Peloton or sparkling water on tap? Do people want a Zoom room with a tasteful background? Are your future members Gen Z marketers or lawyers that value IT security?
None of these suggestions are costly, but are they valuable to the customers in your area? It’s time to find out and that where data and experience come into play. We help you make your space efficient and something people talk about.
All of this leads to more customers, higher rents, and more value for your building. You can be like your neighbor and hang the ‘For Lease’ sign and wait for the phone to ring or you can build something for today’s workforce. Class C and B buildings are going to drop it value, but not all of them. If you have the right research, partner, and game plan, then you can take advantage of the changing commercial real estate landscape and be fuller than ever.
