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Commercial Department: Q&A: BOMA International: July 2015

 

Q&A: BOMA International

Richard W. Greninger and Joanne Arnold, BOMA International

The office landscape is changing

The Building Owners and Managers Association (BOMA) International represents owners and managers of commercial properties, which include 10.4 billion square feet of office space in the United States. The organization’s Experience Exchange Report, the latest edition of which was released in June, gathers data from member surveys to provide a comprehensive look at the office market. Its 2014 Economic Impact Study highlights the effect commercial real estate has on the U.S. economy, again measuring data from its members. Richard W. Greninger, a longtime commercial real estate professional, headed BOMA in 2014, and Joanne Arnold helps oversee the organization’s research. We spoke with both about the trends that could change the office market.

An improving economy undoubtedly helps the commercial real estate market. But how much is the opposite also true?

JA: The commercial real estate industry has a huge impact on the U.S. economy. These 10.4 billion square feet of office buildings spent $82.4 billion on operations. The study found that the U.S. economy received $2.76 for every dollar spent on operations, adding $227.67 billion to the GDP, which is roughly twice what pharmaceuticals or the auto industry contributes annually.

From each $1 million spent on operations in commercial real estate, roughly 22 jobs were supported nationwide. In other words, our $82.4 billion spent on operations supported a total of 1.8 million jobs across all sectors of the U.S. economy. You can see from these impressive stats that the commercial real estate industry is a major driver of the U.S. economy.

What trends do you see impacting the office sector?

RG: The biggest trend that we are seeing, and that BOMA is analyzing very carefully, [is] densification of workplace. It’s really a study of how space is being utilized today versus in the past. There was a great bit of downsizing done, just because of the economic impact of the recession in 2008. But then you layer on top of that advances in mobile technology, and the ensuing entry into the workplace of the millennial mind and behavior — and their desire to work in ways that are not compatible with the baby boomers, and the generation X and Y’ers — and you’ve got a formula for a major change in space utilization. There’s the ability for corporate America to save quite a bit of money on traditional office space rent and roll it back into their business models, in the ways of advancing employment ranks and also technology.

What is that new generation of employees looking for in office space, and how must the office sector adapt to meet those desires?RG: Instead of private offices, they want environments where they can sit around and collaborate, free-form discuss things. They take into consideration the external spaces surrounding offices, whether it’s courtyards, roof decks, things like that.

What happened to date is, the designers at a lot of corporations — thinking that all millennials wanted was to work from home, work from the coffee shop, work from the office, work from the car, work from here or there — they missed the boat at providing what they call “focus space” in these offices. So they’re starting to plug more private-type office environments back into the schemes, because that was the No. 1 type of feedback they got from people like Google and others. … It’s a changing environment, but it’s a very big one for us as landlords to stay competitive. What we’re seeing is, in trying to develop these flexible workspaces, is that they want more conferencing, more meeting and catering and collaborative space, and they want the landlord to produce that on a common-area basis.

What other changes do you foresee for the commercial sector?

RG: The marketplace for industrial investment is rocketing. We’re seeing our members, which were traditionally 100 percent office building shops, are now probably 70 percent industrial, 30 percent office. That’s a real trend going forward in the future.

Richard W. Greninger, vice chairman of operations for Carr Properties, served as 2013-2014 chair of BOMA International. Greninger, who is based in Washington, D.C., has 35 years of experience in commercial real estate encompassing acquisition, financing, leasing, operational management and dispositions. Greninger is based in Washington, D.C. Joanne Arnold is BOMA International’s manager of research. Reach her at jarnold@boma.org.


 

Rob Crow was online content editor for Scotsman Guide Media. For questions regarding this article, e-mail articles@scotsmanguide.com.

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