Anew calendar year engages most firms in the process of assessing past performance and planning for future growth. This exercise is typically focused on targeted opportunities to expand their business, required financial and human capital and, subsequently, facility needs. However, current economic conditions have given rise to some uncertainty as both landlords and tenants look ahead.
“The flood of economic news is often confusing and many times contradictory depending on one’s perspective,” says Anne-Marie Ayers, an office specialist and first vice president with CB Richard Ellis in Tampa. “The constant, however, in any market cycle, is that landlords and tenants alike are attuned not only to operational efficiencies but also creating an environment that fosters productivity. That common thread helps add some clarity to the solution.”
Smart Business asked Ayers for her insight about today’s office market conditions and how owners, in particular, are preparing to address current and expected future demand.
Does the Tampa office market reflect the current conditions of the residential market?
While the slowdown in the residential sector has had some effect on tenants directly or indirectly associated with that industry, current conditions in the office sector remain in much better balance. Even with recent new inventory, vacancy rates remain relatively low and, therefore, lease rates have risen. It is important to remember that the universe of commercial properties is much smaller than the residential sector, affording developers and owners a better understanding of the competitive landscape. Additionally, the time frame to deliver new commercial products is also typically much longer due to a variety of regulatory, cost and construction factors. While a longer lead time makes it somewhat harder to anticipate market conditions further out, it does provide the commercial development community time to modify accordingly as it progresses through the planning process.
What are some of the key factors in planning for today’s office environment?
Demand for space drives new development so owners are continually working to address various aspects important to tenants. Location still remains the primary consideration for most tenants. Travel time, access to major road arteries and proximity to employees are key. The value of time, in both personal and professional lives, is increasingly important to today’s work force. Perhaps equally important is the physical environment itself. LEED certification is now driving a much more consistent approach to operational design, construction and day-to-day efficiencies. These efforts are not only directly beneficial to employee health, productivity and retention, but also validate commitment to good community and corporate stewardship. Leadership in this area is vitally important to smart growth, be it here in Tampa or worldwide.
Can older properties compete with today’s newer office structures?
As long as reasonable demand for space continues and lease rates can justify additional capital investment, most existing buildings can compete favorably. Again, fundamentals of good location, parking and proximity to residential and support amenities will serve to support and enhance long-term value. In addition, an older property has the advantage of an existing tenant base in place. In most cases, this is a plus for the existing owner to continue that relationship. For many tenants, their current location will typically be a viable alternative in addressing future needs. The majority of our office inventory is controlled by institutional ownership that have every motivation to maintain their investment either for long-term hold or to sell based on internal business decisions or as certain market conditions may dictate.
With the market in balance, when should tenants begin to address their needs?
In a lease situation, tenants should be actively engaged in addressing their space needs eight to 12 months from the expiration date of their current obligation. However, prior to that phase it is very important that a tenant carefully consider not only near-term but long-term requirements, as well. By taking the time to plan ahead, tenants avoid potential disruption of their business and the property owner can be in a much better position to accommodate the tenant’s long-term needs. That’s the real challenge in today’s economic environment, but it really makes for a win-win situation for both parties.
ANNE-MARIE AYERS is an office specialist and first vice president with CB Richard Ellis in Tampa. Reach her at (813) 273-8422 or firstname.lastname@example.org.