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During the great recession, of all the commercial real estate sectors, none were affected greater than the office market. For a company the two biggest cuts to the bottom line during the downturn were in space needs and staffing. The need to survive by going lean provided companies the opportunity to reassess their ability to provide services with less overhead than previously believed.
As the market has recovered, we have not experienced the same pre-recession organic growth within the traditional sectors of legal, finance and professional users. The majority of businesses continue to be very cautious as it pertains to taking on too much space for too long of a term without the appropriate flexibilities to adapt quickly to the ever-changing economy.
What has transpired is a new outlook on how the office space is utilized to build collaboration, efficiency and productivity. These new trends have spawned from the massive growth within the tech industry and the success in the open plan workplace. With senior employees and executives giving up their private offices work side-by-side with their colleagues, pressures are now being put on the traditional sectors to incorporate many of the same trends to attract the new millennial work-force.
Depending on the industry, there is a fine-line of how much you veer from the traditional layout. Law firms and financial companies still maintain the private office concept, however we are seeing a massive shift to same-size offices for the senior partners to the new hire, as well as full glass offices to incorporate natural light and collaboration and café style break rooms.
How does this affect your tenancy, particularly in Las Vegas? With Las Vegas historically 12-24 months behind the national trends in office space design, we are quickly catching up. The difference between Las Vegas and the major markets seeing these changes are:
· Minimal New Development – With the lack of new office development in Las Vegas (The Gramercy Phase II, only active office development), we are seeing tenants build-out the open plan workplace in buildings that were not designed for these layouts.
· Restrooms – With companies using less space, but not decreasing employees, existing buildings were built to a code based off a certain amount of private offices vs. open work space. This original design dictated how many restrooms were required in a building. With companies using 20-40% less space, this leaves the landlord the ability to lease additional space in the building, which equates to more people using the facilities. Landlords may have to start incorporating additional restrooms to accommodate these new open plan.
· Parking – Much like the restroom concern, parking is just as much, if not more of an issue and concern. With the market recovering, and landlords leasing up their buildings, what used to be an oversight when it comes to parking allocation, is being taken much more seriously. With the new open plan concepts, the existing inventory was not designed to accommodate the new parking ratios of 6-10 per 1,000 square feet of leased space. With traditional parking ratios of 3.5-5 per 1,000, landlords are either going to have to buy additional land, build a parking structure, leave space unoccupied in the building to accommodate the tenant’s high ratio, or focus on tenants that don’t require todays parking needs.
· Live-Work-Play – Unlike many of the traditional cities across the United States, Las Vegas is lacking Live-Work-Play options. With the majority of development happening in the suburban market, having an urban environment that provides a true live-work-play lifestyle in Las Vegas isn’t in the cards for the foreseeable future.
When exploring your office space needs, be sure to understand your needs today versus those same needs in 3-5 years from now, and how todays trends are going to affect your tenancy for the entire lease term. Having a complete and comprehensive strategy to align your facility needs with your business objectives will help overcome unforeseen obstacles down the road.