9.13.16: More Takeaways from the Yeager Office Suite Transaction

One of the most fascinating takeaways from the Yeager Office Suite transaction is the extraordinary demand for office suite space. It was not uncommon for new buildings in the portfolio to absorb to 100% occupancy within 90 days. Knowing that traditional suburban office buildings are struggling in many cases, all the participants in the transaction were eager to learn why the office suite concept was in such high demand.

We discovered the following:

Demographics, lifestyle and business efficiencies are driving an evolution in office market demand throughout the United States. Traditional large block space office leases are declining in many markets, particularly in suburban markets. Highly competitive business environments for companies in an economy that is not growing are forcing expense reductions in order to grow profits and occupancy costs are on the hit list.

The evolution has generally moved from a time when everyone had a nice big personal office within a large block lease that consumed all or part of a suburban office building to a time of cubicles that could squeeze more employees/sf of office space became the norm. When that was not cost-effective enough, a portion of the cubicles became “shared” among employees.

Now employees are being forced out of their suburban office block space altogether. Telecommuting is the rage, but it is not perfect. There can be tremendous distractions with the “home office” from kids/wives/husbands, no office equipment (high-speed copiers, scanners), no professional phone pick-up/reception, awkward to bring clients to meet, etc.

Providing the best of all worlds, the office suite market is growing rapidly. The concept brings employees “in touch” with local clients by being able to place one or two salespeople right into the client market. It provides for short commutes locally versus long, stressful commutes, thereby maintaining quality of life for employees who might otherwise work for a competitor closer to home. Office suites provide a professional environment with reception/professional telephone service, conference rooms, high-speed office equipment and internet and no barking dogs or other distractions.

This entry was posted in CMBS, CMBS Conduit Loans, Commercial Lending, Commercial Real Estate Loans, Michael D. Sneden, News & Recent Closings, The Banker's Mortgage Conduit, Valuexpress and tagged , , , , . Bookmark the permalink.

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