What are occupants’ expectations for the commercial space they lease?

HOW MUST COMMERCIAL SPACES ADJUST TO RETAIN AND ATTRACT TENANTS?

LEADING AREA EXPERTS WEIGH IN …

After a year of uncertainty, the only thing we all know is that commercial spaces can’t continue under the conditions of February 2020. Caliber invited a team of commercial real estate specialists to reflect and prognosticate on what the future could look like.

WHAT DOES THE FUTURE LOOK LIKE?

According to Brian DeRevere, “There is not a lot of proactive work done ahead of time, would be kind of guessing as to user need. We see more of a willingness to adjust with direct user input.” Stephen Zieg, Principal with DRA Architects agrees that without enough progress with aggregate staff returns “I don’t think they are comfortable making decisions at this time.”

Allen C. Buchanan, SIOR, Principal, Lee & Associates notes, “Tenant needs really revolve around the type of commercial real estate they occupy. As an example, if you are an office tenant you probably are facing some uncertainty in terms of how much square footage you need, how much of your workforce will be virtual going forward and how much will be in-place. However, if you are a retail tenant chances are you were on a downward trajectory before the pandemic began. So the events of the last year probably solidified your direction.”

Our specialists concur, most organizations remain in a wait and see mode. Stephen Zieg, Principal with DRA Architects reflects, “The only changes that we are seeing companies make in their existing spaces — without modifying the space– is creating separation in their cubicle designs. We are seeing larger cubicles with high wall separation between cubicles like adding glass panels. For Louis J. Tomaselli, Senior Managing Director with Jones Lang LaSalle Brokerage, control seems to be highly desirable, “It’s really still too early to tell but first signs that we see are tenants focused on a large floor plate, new A-quality lowrise buildings where they can control their environment and have little interaction with multiple other tenants. That also means on the other side, high-rise buildings, even the very nice Irvine Company projects, are sitting with lower tenant interest for the same reasons —too much interaction, too many elevators, too much exposure to other tenants.”

DeRevere notes, the demand is rising for, ”No touch doors. And, we believe creative office concepts will continue to evolve.”

CHANGES TO HVAC/VENTILATION

According to Zieg, “the changes that have surprised me the most are those relative to the mechanical systems. We see tenants looking at higher quality air filters, increasing the number of air changes per hour and segmenting into smaller zone areas.” DeRevere agrees, “… better air filtration systems, some kind of direct access to fresh air (like screens) have not been a part of commercial designs, but might be going forward.”

While there is an increased demand for heightened filtration on A/C systems, there doesn’t seem to be a consensus as to what constitutes adequate ventilation for interior spaces either from the CDC or any other advising body.

As if we have not been flexible enough, Buchanan reflects, “In the office leasing world we have noticed a return to times where high vacancy was prevalent. By this I mean bonus commissions, abated rent, increased tenant improvement dollar expenditures, and softening of rental rates – divergence from asking rents.”

In a podcast devoted to discussing JLL’s report, Better than Normal: Vision 2021, report author Christian Beaudoin, Managing Director of Research and Strategy suggests , “… buildings that focus on health and wellness for their occupants and tenants will have a leg up over more commodity buildings in the market. Those buildings that focus on the employee experience and making sure that people feel safe, protected well and healthy throughout their daily journey to the office and in the office will certainly have advantage over the others in the market.”

In our next issue of INSIGHTS, we will explore changes to the industrial sector.