Okay, now things are getting creepy. Or I am just getting old fast. Below are the coming trends on wearable technology and now implantable technology and how it is changing the office worker.
–No more fobs to get into your office
–No need to take your gym membership card to the gym
–Swipe your hand to get loyalty points at your retailer
More than that, companies are now using this technology to:
–Monitor employee productivity and movements
–Help lower the company insurance premiums by tracking workouts and providing incentives
–Track stress levels
All this has me thinking about our team and how fortunate I am to have engaged, trustworthy, and fantastic people working for C2. You should work with us on your next office transaction to find out just how good they are.
Wearable Technology Creeps Into the Workplace
August 7, 2015
[NEW YORK] “Physically it was like getting a vaccination; a pain in the hand that was over very quickly,” explains Hannes Sjoblad, describing the moment a piercing specialist implanted a microchip under his skin.
The NFC (near-field communication) chip allows the Swede to swipe into his office, set the alarm system, register loyalty points at nearby retailers and access his gym.
Around 15 per cent to 20 per cent of the 250 people working at the Epicenter co-working space in Stockholm where Sjoblad is “Chief Disruption Officer” have opted into the program, which eliminates the need for key-fobs or electronic entry cards. Since announcing it earlier this year, Mr Sjoblad has been flooded with inquiries from companies looking to adopt a similar system. “Security companies, office operators, real estate companies and even military organisations want to see how this technology works,” Mr Sjoblad says.
It’s all part of a trend toward using technology – usually wearable devices like smartglasses, wristbands, smartwatches and badges rather than implantable ones – to monitor employee movements and improve productivity. The promise of data-driven efficiency can be alluring to the board room, but it comes at a cost: the employee’s right to privacy.
“It started with big data discussions around gathering business insights and not having the human accounted for in that data puzzle. Wearable technology can help make the workforce visible in that,” says Chris Bauer, Director of Innovation at Goldsmiths, University of London.
Devices must be paired with a powerful back-end system, however.
“Wearables are not useful on their own,” adds Guillaume Roques, head of developer relations EMEA at Salesforce. “They have to be part of the move toward a system of intelligence, which combines big data, the cloud and analytics. Connecting them all together is a big challenge.”Health and Wellness A key trend is companies using wearable devices to track employee health – giving staff fitness monitors to keep tabs on their activity levels as part of “wellness” programs. This data can be tied into health insurance policy premiums or other incentive programs to reduce healthcare costs.
Oil giant BP, for example, has distributed more than 24,500 Fitbit fitness trackers to staff of its North American business in 2015 alone using such an incentive program. “These programs are often strongly linked to companies negotiating lower rates on collective insurance policies. Underwriters are more trusting of these devices than the self- reporting of employees,” explains Bauer.
According to Gartner around 2,000 companies worldwide offered their staff fitness trackers in 2013, rising to 10,000 in 2014. The firm predicts that by 2016 most companies with more than 500 employees – will offer fitness trackers. Safety Applications In industries with high-risk roles – such as mining and oil and gas – wearables can play a critical role in safety. Truck drivers at Rio Tinto’s coal mines in Hunter Valley, Australia, for example have been using a device called “SmartCap”which looks like a regular baseball cap but has sensors to detect the alertness. It provides an early warning for when a driver is approaching a “microsleep,” designed to reduce fatigue-related accidents.
Meanwhile XOEye has developed a set of industrial smartglasses that can capture HD video of complex problems encountered in construction, manufacturing or field services. Two-way communication means that a remote viewer – be it a manager or a technical specialist – can guide or train the wearer from afar. APX Labs is working with Salesforce on a similar system, called Skylight.Operational Efficiencies One of the best established applications for body-worn devices in the workplace is to help streamline logistics. For example, UK supermarket chain Tesco gives armbands to staff in a distribution center in Ireland. These can track the goods being transported across 9.6 miles of shelving, eliminating the need to mark clipboards and giving mangers estimated completion times.
Similarly the “pickers” who work in Amazon warehouses wear GPS tags and have a handheld scanner that tells them the most efficient route to take to collect an item for delivery. Drawbacks While wearable technology can bring huge benefits, they also bring challenges, particularly as devices start to gather more and more personal and biometric data. Consumer-grade gadgets don’t always have rigorous encryption and other protections to safeguard personal data, which could leave companies exposed to data leaks or theft.
“We hear about data breaches every week – and it’s naive to think that the same won’t happen with these miniaturised devices,” says technology lawyer Paul Lanois.
There’s also the risk of inadvertently creating an oppressive working environment that damages staff morale. “It can be seen as an intrusive surveillance tool rather than something that improves productivity or performance,” explains Bauer.
UK-based data science consultancy Profusion found this out the hard way. It ran a study to see what data employers could glean from wearable devices 24 hours per day, seeking to improve the wellbeing of the workforce. The research involved tracking 171 different metrics including heart rate, activity levels, location and other data taken from smartphone applications.
“One participant found the idea of continuously checking his heart rate made him nervous,” says Profusion Chief Executive Officer Mike Weston. Another feared that her line manager would be keeping track of her self-reported stress levels. “She felt uncomfortable being under the microscope.” Mr Weston says this shows how careful companies need to be when implementing wearable technology programme. “If there’s a creepiness factor around what you’re doing, you probably shouldn’t be doing it.”
Most of the time we hear how important China is becoming; how the reemergence of Russia is going to affect the US; and of course all the dramatic stories of the meltdowns of Greece and now Puerto Rico. I always try to wrap my head around how these developments will play out in my backyard (Metro Phoenix) and in our business of leasing or selling office space.
Below is a cool graph that shows the worth of US companies and compares them to countries’ entire emerging market stock indices.
–Intel is worth as much as Russia (Intel has invested over $20 Billion in Arizona since 1979 http://www.chandleraz.gov/content/Intel_inArizona.pdf )
–Expedia is worth more than Greece (Expedia is growing in Arizona, they have jobs open and are hiring)
–Wells Fargo is about the same as India (Wells is the 5th largest employer in Arizona with over 15,000 employees)
I am not trying to be myopic or an isolationist, rather I want to know where my bread gets buttered. For me and commercial real estate in Arizona, it’s companies like these who do the buttering.
A good client of ours called last week as he was preparing for a company-wide meeting to talk about their office lease. It was an initial meeting to go over their future office needs and figure out if they would be renewing or relocating. He asked for a list of some questions they should be asking themselves. Here are five questions I gave him to get them started:
1. Does the building fit our culture? Is it too nice, just right or not nice enough?
2. How does building quality affect recruiting staff and producers?
3. How does the location work for our employees? For our customers?
4. How many people in our office are anchored to their work spaces? How much space are we wasting if any?
Who works mobile and how often?
5. What will our office look like in 5 years, and 10 years. i.e. # of staff, layout, technology changes, etc.?
Below is a great article from Entrepreneur.com that goes over another helpful list of questions to ask. I’ve highlighted the most important parts to make it a quick read. There are a ton of other questions to ask yourself on your next lease(s), which is the second biggest expense in your company behind payroll. If you need any help with your next office transaction, please call us, regardless when your lease expires. We ask the right questions.
P.S. The National Association of Real Estate Editors (NAREE) recently named the winners of the Eighth Annual Robert Bruss Real Estate Book Competition and Craig was honored as The Best New Author Award for his book, “How to Win in Commercial Real Estate Investing.” The judges noted that the book is “a helpful guide for getting started in a complicated and intimidating field.” Helping others experience success with their commercial real estate investments has been a passion of Craig’s for years. If you would like a copy, please click here.
10 Questions to Ask Yourself Before Choosing an Office Space
By: Lisa Girard
March 19, 2013
Image credit: Office Space
Choosing office space can be very challenging because your decision will have so many repercussions for your business. The wrong location, for example, could cost you employees or clients. What’s more, you have to base your choice on your company’s future needs, not just your current situation.
Given that landlords prefer lease terms of three to five years, entrepreneurs should consider these questions carefully before signing on the dotted line:
Is there room for my company to grow?
Any company must consider not only its immediate needs, but also growth and other factors that could change space requirements over the course of the lease. If you can’t afford to take extra space to give you room to grow, try to negotiate a shorter lease term or add language to the lease that gives you the first right of negotiation on any adjacent space that becomes vacant, says Julie Clark, a broker with Commercial Space Advisors in Seattle and founder of SharedBusinessSpace.com, a national online directory.
Is it the right location for my key employees?
Consider where your key employees live and whether the space is convenient for them. A long, expensive commute may push them to seek employment elsewhere. “When considering a move, you might want to let your key staff weigh in so you don’t risk losing them,” says Peter Riguardi, president of New York operations for Jones Lang LaSalle, a commercial real estate firm.
Is the location convenient for clients?
You also want your office to be accessible to clients, as transportation costs continue to rise and people may not be as willing to travel to patronize your business. If you leave an urban location for a cheaper space in the suburbs, consider whether the lower expenses will make up for the possible loss of clients. Even in the age of video conferencing and Skype, it’s important that face-to-face meetings be manageable, Riguardi says.
Does this office send the right signal?
Think about the signal you want to send when you pick your location. Your office space will be much more than a collection of cubicles; it also will be a sign to others of how much money you’re making. “I’ve seen companies spend for a lavish space they’re very proud of. They invite clients to see it, and the clients wonder if they’re paying them too much for their services,” Riguardi says. On the other hand, if you don’t spend enough, people may wonder about the financial health of your company.
Are there hidden costs I’m not considering?
Calculate the full cost of the space–rent, utilities, construction costs, moving expenses, and other costs that may not be obvious. Because there can be hidden expenses, Riguardi recommends hiring a professional broker to help you understand your total outlay. “You have to look at the costs associated with the move, even restoration of the space you’re moving from,” he says.
What is the parking situation?
It’s important to consider the amount of parking available at your proposed location, as well as the potential cost to employees and customers. If parking is tight, is there a place where employees can park so customers get the most convenient spaces? Negotiating special employee rates and validating customers’ parking tickets are good ideas, but they need to be worked into your budget, Clark says. “If it is difficult and costly for your employees or customers to park, they might not be your employees or customers for as long as you would like.”
Is the office ADA compliant?
Before choosing a building, make sure the landlord is responsible for compliance with the Americans with Disabilities Act, says Jason Hughes, president of Hughes Marino, a tenant representation company in San Diego. “This could be an enormous cost. Why gamble?” For example, the law states that doors to office suites should be at least 32 inches wide and require fewer than five pounds of force to open, while carpeting in areas open to the public must be secured to the floor with a pile of less than half an inch.
Would I consider sharing an office?
Sharing space with another company saves money not only on the office rent, but also on the cost of common areas like kitchens and bathrooms, Clark says. For referral purposes, it’s ideal to share with complementary businesses, such as an architect with a builder or a PR firm with a Web designer. There should be a formal agreement between tenants, even if it’s month to month. Also, “if it is a good fit for you, you want to make sure the lease on the space you’re sharing isn’t going to expire anytime soon,” Clark says.
What if I sell my company during the course of the lease?
If you hope to sell your company, make sure the lease is clear about owner responsibility, Hughes says. Many leases force the original company and its owners to have liability in the future should the future tenant not perform. “There’s nothing happy about selling your company only to find out two years later that the buyer hasn’t paid the lease payments and now the landlord is coming after you for unpaid rent,” Hughes says.
How secure are the lease and rental rate?
The last thing you want is to get established in a space, then find at the end of your lease that your landlord is renting the space to someone else or jacking the rent way up. Clark suggests negotiating language into the initial lease that gives you the option to renew. Although rental rates are usually negotiated at the time of renewal, you also can try in the original contract to cap any increase at no more than 5 percent. “Real estate is rebounding in many areas, which means rental rates are rising,” Clark says. “If you can control how much, it’s a stick in your court.”
Across the country, the hottest markets have been those with a tech/startup employment driver. Other growth markets were locations with oil, but those are now mostly gone. Dead. This cycle, most markets are growing based on their ability to attract tech companies and startups. In Arizona, for the first time ever, this has been a large part of our net absorption over the past few years. With limited homebuilding, we are creating a diversified economy that has been discussed for decades. Below is an interesting article from 42 floors, a startup firm that leases small spaces in the bay area. I find it ironic that Landlords in that market are snubbing startup companies in their buildings for a number of reasons including:
–Lack of credit or even a way to evaluate their prospects for success.
–Sublease of a sublease—these companies grow and move pretty quick if they are successful.
–Diversification—nice problem to have in San Francisco, but this is not normal across the US.
Funny, but we don’t have those issues here in Phoenix. First class problems indeed.
P.S. My partner, Andrew, and I along with another team were interviewed by Globe St.com about cross-generational collaboration within Commercial Real Estate. Here is a link to the brief video filmed at the SIOR World Conference in Scottsdale, AZ. I think it turned out interesting.
Landlords are trying not to rent to startups…
By: Jason Freedman
There is a funny dynamic going on in the San Francisco office market. Landlords are thrilled. The strength of the startup economy and the migration of startups from the Peninsula to San Francisco have led to the lowest vacancy rates ever and tremendous increases in price per square foot. The 42Floors research team contacted Garrick Brown, Vice President of Research at commercial real estate brokerage DTZ. Check out the crazy rise in prices and corresponding drop in vacancy rates.
Because of this incredible demand for office space and the resulting low vacancy rates, landlords have been able to push rents higher and higher, which has allowed them to take tremendous amounts of money off the table as well as continue to invest in their assets. So why do you still hear of startups struggling to get their offers accepted by a landlord? To the casual observer you may just believe that it is a tight market and the competition is fierce, but actually there is more going on.
Many landlords (though certainly not all) are trying as hard as they can to get non-startup tenants right now. We at 42Floors recently experienced this firsthand when we were searching for our new office space.
So our 42floors research team started digging and we found that there are actually a whole bunch of reasons landlords are avoiding startups right now, even though they’re grateful for having them as current tenants in their buildings. Here’s what we learned:
Why Landlords Don’t Want to Lease to Any More Startups
They want a balanced portfolio.
This is the most common response we’ve heard from landlords. Landlords look at their tenants as a portfolio of revenue streams and risks. Diversifying that portfolio across their buildings means that they want leases that end at different dates so that a building never goes a hundred percent empty. And they want varied credit risks that are uncorrelated from each other. This is where it hits startups really hard.
When a landlord already has a large percentage of their lease revenue coming from startups, they look to diversify it with non-startup leases under the assumption that if the startup economy goes south, it will take many of the startups with it. Many of the landlords remember back to the dot com bust. Back then, it was law firms, architecture firms and other slower growth, but profitable companies that kept the dollars flowing when the startup offices went vacant.
If you’re a startup putting an offer for a space in which a non-startup is competing on even remotely similar terms, the landlord that is over-weighted with startup leases will likely choose what is not necessarily a safer bet, but is certainly a different bet.
Landlords have almost no tools to evaluate a startup’s credit risk.
Here in San Francisco, the startup capital of the world, even a full decade after the startups moved from Silicon Valley to San Francisco, landlords are still struggling to evaluate the credit risk of a startup. The standard tool of choice for all landlords is to read a potential tenant’s financial statements. When you read the financial statement of the average startup, it’s not pretty. Even a relatively low burning startup still looks downright scary to a landlord – costs exceeding revenue, balance sheet dwindling down, etc.
I recently had a landlord ask me about one of the highest profile unicorn startups in the city, wanting to know if it was a reasonable credit risk for one of his buildings. As I tried to explain that their costs were so high because of their tremendous growth rate, this landlord’s eyes just glazed over. He eventually declined the lease offer and picked a slower growing (but traditionally profitable) energy company.
Landlords don’t want to get in the startup evaluation business. While they do like the prestige of a famous startup and what it may bring to the environment of their building, they’re mostly just afraid of the company failing in the next 5 years.
Most lease terms are longer than the current financial runway of a startup.
Scan our list of office leases. You’ll see that most are pushing five years on anything over 2,500 square feet right now. Landlords are simply taking advantage of the fact that it’s a tight market and they can push for longer terms even if it’s not what the tenant wants. Even the best funded startup almost never has a five-year runway.
While more an established profitable company may have a much smaller balance sheets than a well funded startup, it can show an infinite runway.
They’re fatigued with sub-sub-subleases.
Startups that do well may have to lease a space for 5 years, only to move out after only nine months because of their growth. To the startup this is fantastic news, but to the landlord it’s the beginning of an annoying sublease process as they are constantly spending money on their lawyers to approve each sublease.
Our last office was leased to MoPub, which then had the lease taken over by Twitter following their acquisition, who then subleased it to us. We then sub-subleased half the space to Big Commerce, who grew out of it in 6 months and sub-sub-subleased it to another company, which split it with one other startup.
At one point, we needed to change something. It required coordination of 5 signatories of 5 different companies, each counseled by their own broker and lawyer.
Landlords believe the economic apocalypse is coming.
I’m actually stunned how similar landlord opinions are in this regard. This little insight has spread through the landlords and brokerage market with incredible consistency: Most economic cycles are 7 to 10 years long. In 2018, it will have been 10 years since the last big economic dip. So simply by the law of averages, they’re planning their office terms assuming there will be some big downturn in 2018 and they don’t want to have startups that are dependent on future fundraising in their spaces when it hits.
Even Large Security Deposits Don’t Matter.
In response to landlords being squeamish about startups’ risk, some startups are using their venture capital backed balance sheets to offer large security deposits. They are basically saying, “Look, I know you don’t trust my long term credit, but you’ll have so much of my money in your bank account that even if I do default you’ve got plenty of money to cover any vacancy period.”
But, while a very large security deposit seems like it should calm those fears, most landlords, especially those who are professional asset managers, are trying to avoid problematic tenant situations, not just decrease the financial risk of the problem.
They know from experience that when a tenant starts to struggle to pay their rent, they begin negotiating with their landlord to give back some or all of their square footage early. If, as a landlord, you believe that the market will continue to go up then this is not such a bad thing because you may be getting space back that you can then re-lease at a higher price point. Landlords in this case can even double-dip by charging the outgoing tenant a penalty while simultaneously bringing in a new tenant at a higher price.
However, as a landlord, if you believe that we’re near the top of the market (as most landlords in San Francisco do) then your expectation is that in 2, 3 or 4 years, when tenants want to do a renegotiation, you’ll have to fill that space with a tenant at a lower price. And if that tenant signs on for a long term lease, then the landlord just locked in that lower price.
All of this hand wringing is the type of issue that the landlords are trying their hardest to avoid. What they want is to lock in these high prices that startups created and then pick non-startup tenants who can pay them. It’s actually quite brilliant.
So what’s a startup to do? (Call Craig Coppola and relocate to Phoenix—Ok Craig put this in. Just checking to see who actually reads my narrative). The reality is the high price of commercial real estate is the inevitable flip side of the low cost of capital. If you want to be a San Francisco startup, you’re going to pay up for office space. You’re going to be in a competitive market with space going usually in days, but often before it even hits the market. And you’re going to be stuck accepting longer term leases; and that’s if you can successfully win the tenant selection process.
Speaking of, winning the tenant selection process is one of the most over-looked reasons to work with a great broker. Landlords often trust the judgement of the tenant rep over their ability to analyze the risk of the tenant. When a tenant rep and with a long-term relationship pitches your company as a worthy tenant, it goes a long way to helping ease the concerns of the landlord.
We’re also starting to see more startups fill-in in the ancillary areas outside of SoMA like the Mission, Mid Market and North of Market. We’re starting to see a few make the jump to Oakland where space requirements doubled last year. And we’re seeing a large rise in the sublease market as there are more and more startups with five-year leases that only stay for a-year-and-a-half.