Office Properties

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July 2015 — Office Properties Quarterly — Page 19
Design
A CEO client of ours said she
wanted a new space that
appeals to millennials and
referred to the potential space
as “one of those LoDo loft
kind of spaces.”When asked for more
details about her request, she wasn’t
exactly sure why she needed this type
of space, but said she was trying to
think about the future. She was guess-
ing what would be more fitting to
younger workers.
I told her about a survey LinkedIn
released that examined 10 things in
the office that are heading for extinc-
tion. The list included standard work-
ing hours, desk phones, desktop com-
puters, formal business attire (includ-
ing suits and ties), the corner office for
managers or executives, cubicles, USB
thumb drives, an office with a door,
business cards and copiers.
This survey and current trends point
to a more socially networked office
space that is constantly flexible and
cost-effective. But many top decision-
makers are not sure why they may
need to change their office space. As a
result, many default to the “LoDo loft
kind of spaces” without being aware
that the nexus to the future is con-
tinual change and Lower Downtown-
type space may be outdated sooner
than they expect.
The legendary strategist Gary
Hamel, author of The Future of Man-
agement, observed that “what con-
fronts every company, large or small
… is learning to thrive in a world
where change is discontinuous, unre-
lenting and pitiless … companies are
much better at optimization than they
are at rule-breaking, game-changing
… radical innovation – and yet that is
exactly what is required in turbulent
times.”
Millennials are
more prone to break
the rules, change
the game and sup-
port radical innova-
tion. Yet baby boom-
ers and Generation
Xers think that a
“sprinkle of LoDo”
should be enough
to keep a multigen-
erational workforce
happy.
But the consider-
ation of social and
behavioral aspects, patterns of work
(home, office and airport), technology,
connectivity and a changing genera-
tional view of the necessity for office
space suggest that the future of office
space could be radically different
than the traditional physical space we
know it to be in 2015.
The sharing economy is on the rise,
and embracing it may increase per-
ceived value in office space. A shar-
ing economy takes an assortment of
systems, often leveraging information
technology to empower individuals,
corporations, nonprofits and govern-
ment with information that enables
distribution, sharing and reuse of
excess capacity in goods and services.
Recently I spoke with a disruptor
company CEO challenged by his own
industry for innovation. He suggests
a configuration more in tune with
emerging preferences. He defined an
office layout with desk space for up
to three people, a landline cordless
phone with routes to mobile phones,
access to huddle rooms, a graphic
designer who can produce work on-
site, a virtual receptionist and a refrig-
erator fully stocked with beverages.
All these questions are harbingers of
the sharing economy, meanwhile the
LoDo look had little relevance to his
needs.
Why You Should Care
In larger organizations, the tradi-
tional real estate department no lon-
ger exists; instead it is handled within
the functions of a chief financial offi-
cer. In mid- and small-size or incuba-
tor companies, office space decisions
typically fall to the CEO or the office
manager. In both cases, little thought
to office space is given to under-
standing current processes, future
trends and best practices. Most of the
thought is given to cost per square
foot of rent. However, if the space is
deficient for technology, on-site and
virtual connectivity, and a collabora-
tive environment, the cost to correct
those oversights in the future could be
far more than the mere price per sf.
According to a study by Kingsley
and Associates, a real estate consult-
ing firm, the top two reasons tenants
don’t renew an office lease is price
and space functionality. You also
should add the cost of downtime,
which in a strong market is 90 days
and in a normal market may be nine
to 12 months. Obviously the need to
avoid such disruption is critical to
profitability and to survival for many
businesses.
Recently we worked for a tenant
who was in a building where the
landlord didn’t care about his future
needs or the future of office space.
The landlord basically said, “New
carpet and paint, and a $3 per square
foot rent increase – take it or leave it.”
The cost of renewing for the tenant
would have been $135,000. Letting the
tenant go cost the landlord $729,000.
This results from lost rent, eventual
construction downtime for a new ten-
ant improvement package as well as
inside and outside brokers’ commis-
sions.
Failure to consider the needs of
the tenant cost the landlord almost
seven times what it would have cost
him to work with the tenant and his
broker to remodel a space that bet-
ter addressed future needs, includ-
ing technology requirements. A new
landlord, alert to future trends, paid
to have this same high-credit tenant
relocate to his building. The new land-
lord believed in proactive solutions
and tenant advocacy. The old landlord
is still sitting on a very dark space.
“Millennials and Gen X workers
expect the flexibility of being able to
work anytime, anywhere, and they
demand cutting-edge capabilities,”
said Leslie Silvey of NAIOP. “The
streamlining of technology results in
a continuing trend of smaller work-
spaces. Desktop computers will even-
tually give way to laptops and tablets,
eliminating the need for large desks
while complex phone systems will
be replaced by a need for cell phone
docking stations.”
In that context, the LoDo loft look
is less and less relevant to the future.
Now commercial real estate profes-
sionals must give thought to collab-
orative, technology-rich environments
that encourage “we space” above “me
space.”This means considering prac-
ticality and long-term utility for an
evolving workforce different than we
have observed over the past quarter
century.s
Ben Gilliam
Managing
principal, Coldwell
Banker Commercial
Alliance, Denver