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— Office Properties Quarterly — September 2016
T
he commercial real estate
market is constantly evolving
in the modern era, particularly
in space utilization and trans-
formative technologies.These
trends can seem overwhelming to
a layman, with new buzzwords and
technologies appearing on a monthly
basis. Even self-driving automobiles
will impact office space in the near
future.What additional trends will
influence office space usage? How
can tenants and property owners take
advantage of opportunities that go
hand-in-hand with new trends, as well
as mitigate potential negative implica-
tions?
Office product in Denver is changing
to reflect trends within the corporate
environment, as are offices in major
markets across the country.The hot-
test topics are office space densifica-
tion – the reduction in square footage
occupied per employee – and flight
to quality.These two trends gained
widespread acceptance and accelera-
tion locally and nationally following
the Great Recession. Reducing space
occupied per employee is a simple way
for companies to reduce costs. Concur-
rent with rising vacancy and flat to
declining rents in Denver’s office mar-
ket, many tenants were able to lease
higher-quality space while implement-
ing cost-reduction strategies during
the market recovery.Today the market
is different, with drum-tight availabil-
ity in select submarkets and steadily
increasing rents, yet tenants still need
to reduce occupancy costs.
Increases in collaborative office envi-
ronments and telecommuting empha-
size the transformation in corporate
layouts from traditional office-inten-
sive designs to a
more open plan. Pri-
vate offices are dis-
appearing, even for
C-suite executives.
An open plan is con-
sidered de rigueur
for most corporate
environments, from
Fortune 500 com-
panies to entrepre-
neurial startups,
with expansion of
common areas and
adaptive office uses
taking precedence.
According to the
International Facility Management
Association, 70 percent of U.S. employ-
ees work in an open floor plan. One
benefit of this trend is increased team
collaboration and more effective utili-
zation of conferencing space. Develop-
ments in technology also are improv-
ing communication among work
groups and providing for enhanced cli-
ent interface and more activated work
environments. In all trends, control
and flexibility are the greatest priori-
ties.
Rapidly developing technologi-
cal changes also provide a vehicle
for expenditure reduction. Examples
include new LED lighting, lighting-con-
trol systems, demand-side manage-
ment programs to monitor and modify
utility expenditures, and unique pro-
grams designed to provide financing
solutions to energy investment chal-
lenges. Colorado Property Accessed
Clean Energy, commonly known as
Colorado PACE, is one example.
Lighting an office environment is
expensive and can utilize up to 30
percent of electrical
expense allocations.
Lighting retrofit pro-
grams provide a “big
bang for the buck”
with cost savings
on energy, fixtures
and bulbs.The lat-
est trends in lighting
systems incorporate
increasing control
over individual
environments –
either from a ten-
ant or individual
worker perspective
– through technologies including web
and smartphone control, desktop-light-
ing control systems, conference room
versatility and daylight harvesting (the
use of daylight to offset the amount
of electric lighting needed to properly
light a space in order to reduce energy
consumption).
In the context of conference room
versatility, audiovisual technologies
are changing rapidly, providing addi-
tional benefits for tenants. Projectors
are becoming a thing of the past with
smart TVs replacing the dinosaurs.
Flat-screen technology cost has
decreased significantly, allowing most
companies to find upgrades within
their budget.These new technologies
increase mobility and flexibility within
the space, allowing for easy office
reconfiguration and adaptability. Fur-
ther, changes in communications tech-
nologies including voice-over IP pro-
vide greater flexibility within an office
environment, improving mobile office
environments and remote access,
intra-office communications and voice
connectivity through email, while also
supporting collaborative office environ-
ments.
The latest office-finish trends focus
on flexibility and customization
through modular design, whether
in lighting, carpet tile, demountable
wall systems or workstation design.
Emphasis of natural light and finishes
remains a priority, as does simulating
privacy and noise reduction in an open
office environment through the use of
glass partitions and doors.
Perhaps nothing sounds as futur-
istic as autonomous vehicles. Rapid
advancements taking place through
industry-altering businesses like Uber
and its planned use of self-driving cars
will have an impact on real estate, spe-
cifically in real estate needs of parking
structures. As the density of the city
increases or changes, so does the need
for vehicle ownership (and storage). As
public transportation resources expand
and as more ride-sharing programs
become available, the need for individ-
ual vehicle ownership will lessen and
the cars in use will be fully utilized,
resulting in a corresponding shrinkage
in the need for vehicle parking and
storage. Underground parking needs
will decrease and that space will be
repurposed, while stand-alone parking
structures will be redeveloped.There is
no question parking revenues will be
impacted.
With so many transformations on
the horizon, what are we, as real estate
experts, doing to proactively look
ahead? How can we effectively address
these changes and opportunities for
our clients? Even lease documents
are mirroring the focus on adaptabil-
Dan Simpson
Director of
management
services, Newmark
Grubb Knight
Frank, Denver
Ron McInroy
Senior project
manager, Newmark
Grubb Knight
Frank, Denver
Market Trends
