Changing office trends create major implications for future office demands – CREW Tampa Bay. Making assets “relevant” to generate strong leasing activity and profitable exit strategies.
Market leader Larry Feldman recently had the opportunity to speak with Crew Tampa Bay members & guests. Read below for excerpts and follow up from his remarks:
Feldman believes that office buildings in downtown locations will outperform those in suburban locations.
It is a matter of statistical fact that the price appreciation of downtown office buildings in many parts of the nation have recently been appreciating at a much more rapid pace than suburban buildings. This is contrary to the predictions in the early 2000’s that the internet would make downtown locations obsolete.
According to a recent comment by Sam Zell, America is in the process of “re-urbanization”. The country’s “best and brightest” young people are flocking to the gateway cities (NY, LA, Boston, San Fran and DC) where the best and highest paid jobs are.
These “best and brightest” young people are often coming out of the best schools and universities. They provide their employers with the “intellectual firepower” that is needed for the highly specialized tech jobs of the future.
For example, Google recently acquired a massive building in Manhattan for $1.8 Billion. Many social networking companies are employing thousands of people in New York, which is becoming the second Silicon Valley.
Several large tech employers on the west coast are trading in their suburban campuses for new downtown digs in order to attract the young tech-savvy talent. Closer to home, there is talk that tech giant Jabil Circuits is considering a downtown St. Pete location in lieu of its suburban location.
The highly educated are attracted to the big cities because they can find good paying jobs. Also, these young people are often attracted to the 24/7 lifestyle. They seem to thrive on going out to trendy restaurants, museums, art galleries and night clubs. These thriving businesses are also a magnet for conventional office tenants. This trend has become a “virtuous cycle”.
The fact these young people have a lot of disposable income is enabling them to afford to pay higher apartment rents which is supporting the construction of new rental apartment buildings. The higher occupancies in both downtown residential and downtown office buildings has been pushing valuations to the point where 2006 pricing levels in NY have been surpassed.
The wealth divide in America is increasingly becoming an educational divide. Because the big 24/7 cities are attracting the highly educated, they are increasingly becoming centers of highly concentrated wealth, and as a result, they are experiencing sharp increases in real estate values.
The challenge for Floridians is whether or not we will be able to improve our levels of education and whether or not we will be able to retain, rather than export, our best and brightest.