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Office, Industrial Markets Q&A with Colliers’ David Amsterdam

Creative workspaces are shaping the office environment across the country in new and interesting ways. Connect Media asked Colliers International’s David Amsterdam, President of Investments, Leasing for the Eastern Region, to share his insights about the trend. He also touched on office market performance and provides an outlook for the industrial sector in our latest 3 CRE Q&A.

Q: How has the shift to creative office formats and shared space (coworking) changed the office sector? How is this trend expected to play out over time?
A: As predicted, the coworking trend has continued to intensify. In cities across the country, we are seeing more and more space being leased by WeWork, IWG plc (formerly Regus) and other competitors. Nearly every major top 10 market saw significant leasing activity from the coworking arena:

• In Manhattan, coworking accounted for nearly 10% of leasing volume in the first half of 2018, and WeWork is likely to become the largest tenant in New York City in a relatively short time frame.
• The amount of coworking space in Chicago’s CBD has risen to 2.6 million square feet, equivalent to a 250% increase over the past four years.
• In Boston, WeWork is projected to have one million square feet of space by the end of 2018.
• In Seattle, WeWork accounted for two of the largest leases signed in the second quarter, putting the amount of coworking space to above two million square feet.

In addition, coworking providers are making tentative steps to fit their facilities into non-traditional office properties such as retail and multifamily. With the critical mass established, coworking is significantly impacting lease structures and space utilization.

Traditional landlords are responding with their own unique offerings. In Downtown Los Angeles, Brookfield has partnered with Convene at the Wells Fargo Tower and the 777 South Tower, where Convene is responsible for designing and managing workspaces, on-demand meetings and events, food and beverage services and mobile apps for tenants.

Even retail landlords are getting into the mix. Shopping center investment trust Macerich recently signed a deal with the coworking firm Industrious to transform a Barney’s store into coworking space in its Fashion Square in Scottsdale, AZ.

Q: How are some of the top office markets across the country currently performing?
A: From a leasing perspective, the top U.S. office markets are all seeing positive momentum. All but one of the top 10 markets posted positive absorption in Q2 2018. This is an encouraging shift from Q1 2018, when available office space flooded four markets. Rents rose or held firm in nine of the 10 markets, though vacancy rose in four of the markets.

Several core locations are seeing an influx of new supply, which will test the strength of tenant demand and developers’ ability to achieve their pro-forma rents.

• The San Francisco Bay Area leads the top 10 markets on all fronts, including highest rents (striking distance of $100) and absorption, plus the lowest vacancy rate (under 5%) of the group.

• Manhattan held firm in Q2 2018, and leasing volume is on par with 2017. The establishment of Hudson Yards as a premier location was underlined by an 800,000-square-foot lease to Pfizer.

• Boston is on a roll. Several major leases were signed in Q2 2018, and there is six million square feet of known demand in the market. The Back Bay is leading the charge.

• Washington, D.C. saw a sharp uptick in vacancy in its downtown core. More than 1.5 million square feet of new space was delivered in the District in Q2 2018, with more on the way.

• Los Angeles is also facing supply pressures. New supply is starting to deliver in West Los Angeles, and is mostly vacant. Downtown Los Angeles will face a large influx of new space in early 2019.

Q: What is the outlook for the U.S. industrial market?
A: The U.S. industrial sector continues to perform exceptionally well with robust absorption and development, along with record-low vacancy rates and record-high asking rents across the country.

The national vacancy rate dropped to an all-time low of 5%, despite more than 64 million square feet of new supply completed in Q2 2018. Naturally, a lot of the positive performance is attributed to the thriving e-commerce sector, which has brought modernization to supply chain technology.

The sector should continue to benefit from a strong U.S. economy and a resurgent demand for manufacturing. We are seeing the most interest in “final-mile” urban warehousing – the final leg in the distribution chain. Occupiers need to solve this critical space, and will be looking to get a foothold in highly-populated areas.

Growth in investor demand for industrial properties will continue to surpass all other property types. While core markets will prosper, look for the largest increases to occur in emerging markets near logistics hubs and infill markets with large population centers, as investors look to increase their “final-mile” industrial portfolios.


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For comments, questions or concerns, please contact Dennis Kaiser

Connect

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About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

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