It’s hard to believe, but it’s that time of year again. The holidays are here and 2016 is rapidly coming to a close. It’s time to reflect on the hottest trends for tenants and landlords this past year, and to predict what lies ahead.
In 2016, the biggest areas of focus were: the workplace, employment growth, capital improvements and technology. These will continue to be the primary areas to watch in 2017.
If you search Google for the term “workplace,” 195 million results come up. That’s an overwhelming amount of content. It’s not surprising, though, because more than anything this year, we commercial real estate brokers talked about the importance of the workplace and its effect on our clients’ businesses. Increasingly, companies both large and small are focusing on the workplace as a tool to enhance their images, strengthen their brands, increase their productivity and improve their employee recruitment and retention.
Speaking of Google, their workplace is the one that everyone seems to be emulating. Thankfully, more and more companies are taking a less radical approach to their workplace design to create a superior environment to their competitors. Take, for example, our client Red Nucleus and their brand-new modern workplace, which you can see here .
According to the U.S. Bureau of Labor Statistics, unemployment stood at 10 percent in October 2009. Jump forward to November 2014 and the rate was 5.8 percent. In November 2016, the unemployment rate fell to 4.6 percent—its lowest rate in nine years.
Since the commercial real estate industry tends to lag job growth by roughly 12–24 months, 2016 was a year of office expansion for many companies across the U.S. to accommodate additional headcount. I would expect to see this trend continue into 2017 and beyond.
The U.S. office market is beginning to age. Most suburban office buildings that were built in the 1980s are starting to—or have already—lost their allure. The landlords of these buildings are seeing less rent growth and leasing compared to newer, more efficient office buildings.
As a result, 2016 was a year of capital improvements for many aging office buildings trying to bring back their luster to attract and retain tenants. Often, this includes lobby renovations, added amenities and new building systems, just to name a few.
In addition to the continued renovation of existing assets, we expect vacancies rates to continue to decline in many suburban office markets, which could signal a pickup in demand for new construction in 2017.
Commercial Real Estate Tech
New technology has been one of the most talked-about topics among commercial real estate professionals in 2016. Brokers and owners have been stepping up their game with the latest and greatest technologies, including CompStack, VTS and Genea to increase leasing velocity. This is big news because the commercial real estate industry tends to lag in the tech department in comparison to other industries.
Many of these new technologies have been much needed but even as they roll out, brokers and owners still crave new and exciting ways to attract and retain business. According to Bisnow, we can expect commercial real estate owners to ramp up their use of drones to market their facilities. What’s more, they go on to say that, “When it comes to drones, property listings with videos get 60 percent more leads.” We can expect better implementation of existing tech in 2017 and further advancement in new tech—a must-watch trend moving forward.
2016 was an exciting year for commercial real estate. Now it’s time now to relax and to enjoy the holidays with friends and family. Make sure to rest up, because 2017 promises to be another busy and exciting year!
Based in Princeton, N.J., Vinny specializes in tenant and landlord representation for Colliers International, working directly with his clients in the acquisition and disposition of office space. For more commercial real estate insight and trends, follow Vinny on Twitter.