Published Expert Article
by Corey Snadberg
Advisor at Pinnacle Real Estate Advisors

What a ride we have all been on this year! Everyone’s experience has differed, and my heart goes out to those who have had to endure the worst of this. During my years of being deployed, many years ago, as an airborne infantryman, we found out very quickly that depending on what you had signed up to do, individual experiences varied, but we were all in it together over there. I have spoken to the older generation and the majority say this is just another blip on their radar, and not even a big one, they’ve seen it before. “Take heart young man, you still have your health, it’s just part of life and the economy.” My generation can say we have been here before in 2008, and I hope that many of us reflected my anxiousness to apply some of the lessons we learned then: tapping into hope, and exercising some of the steely resolve our elders speak about. Despair, of course, is always one step behind me, but I keep my eyes up, searching for opportunity instead of sinking into non-action. Courage is of course not the absence of fear, it is the action taken in spite of fear. It has been nerve-wracking and exhilarating to have already capitalized on some of the opportunities this year has presented, and to be working on many others. Patience is a virtue, and continuous, relentless action will always result in massive results.

When are people going to return to offices…? Are they going to…? Without diving into any of the young and volatile data, tap into what your subconscious just answered for you…. “Yes.” You miss getting out of the house, you miss interacting, and you know collaboration is much more effective in person. You love your kids and significant other…but…

I personally know a couple of the younger generation, who are just starting out and working hard, who live in a room under the stairs in a house with 5 roommates. While the wonderfully re-imagined “new” Quayle building provides an amazing opportunity for many people, the 291 SF Deaton suite probably starts to really close in on you. The smaller your world, the smaller your imagination, the smaller your drive, the smaller your productivity. While the concept of infinite remote work is freeing and exciting, so is the thought of getting in really good shape, or quitting smoking, or running a marathon. For those of us who have accomplished one of these goals, we probably had a support system around us, people who ran alongside us, a trainer who made us show up at a certain time, or partners whom we bounced ideas around with. Additionally, for every goal we accomplished we have had twenty that never made it out of our minds. It boils down to the presence of daily and even hourly accountability, and human interaction, and while this can be artificially generated through Zoom and productivity monitoring systems, these can be easily worked around by increasingly savvy employees. The largest loss? the creativity sparking conversations that happen with in-person human interaction. At home, the main driver of creativity is just yourself.

Over the next decade, with current climate, and all of the above being taken into consideration, owners and future owners of office product will be most successful when they realize that, while there are plenty of tenants to draw from, adjusting their product to what their tenant’s employees needs & wants are, is going to be key. All office employees have now gotten a taste of working from home, and will more than likely require a more flexible schedule, and on the days they do come into the office, a place that they look forward to coming to, a place that is better than home. This may result in things such as, more amenities in the buildings, smaller overall suite sizes, or shared offices within the suites. Shared offices will accommodate two employees per office, on a rotating schedule, instead of the traditional one employee per office. While slightly more labor intensive on the front end, smaller suite sizes will reduce the overall weight of a tenant leaving, since the percentage of income lost will not be as large. This should encourage more patience from landlords to sign synergetic tenants at market rates. Landlords can weather vacancies better which will result in better stability, higher rents, and higher value. Added amenities may result in the sacrifice of some square feet but can be recovered in a slightly increased common area. According to the Small Business Association (SBA) in 2018, 99.5% of Colorado businesses were classified as a small business. Targeting and capturing these as tenants with ready-to-lease, even expandable offices, can result in a long-term relationship. Providing the place where these businesses can grow and thrive will be a great “win” for office owners. Doing something is always better than doing nothing. Opportunity is always waiting for us to grab its hand and start running.

Featured in CREJ’s September 2020 Office Properties Quarterly