Categories In the News, Office Market

US Apartment Rents are CRAZY

Remember what you paid as rent for your first apartment? That first rent payment probably felt like a real dent in your paycheck. But I guarantee you it’s not anything like today’s rents. 

Apartments have been on fire for a LONG time this cycle. While I think there is still room for this market niche to grow, it is nearing the top. Across the US, rents in some markets are going through the roof. A one-bedroom in SF is up to $3,300/month. With the exception of Chicago, all of the top 10 highest rents are on either coast. 

Anytime a segment of the market gets too overheated, the inevitable market correction will come. When the market corrects, sky high rents will be one reason why.

By the way, Phoenix’s median one bedroom apartment rent is $1,027/month, and a totally reasonable $698/month for Tucson.

We represent office tenants but are always watching all real estate segments and how they affect our clients and the market in general. I have created a group presentation called Commercial Real Estate 101 that covers all segments of the market and the trends that affect each one. Call or email me if you are interested in hearing it.

 

Craig

602.954.3762
ccoppola@leearizona.com 


The US Cities Where Apartment Rents are Astronomical
by Niall McCarthy, 
 
Dec 6, 2016

 

Categories Narrative

Is the Pendulum Swinging Back?

As technology has advanced over the past decade, the number of freelance and remote office professionals has increased dramatically. With only an internet connection, employees can work virtually anywhere, and many companies are embracing the perceived benefits (including less money spent on office space) of allowing employees to work remote.However, among this trend, IBM announced a few weeks ago that they are recalling remote employees back to the office, reversing their previous position. They are the first major employer announcing this recall. 
 
Here are three key points to take away from this move:

  1. IBM employees working remotely will be forced back into regional offices (an estimated 40% of 380,000 employees)!
  2. IBM management now believes that working in an office setting will increase work output in employees.
  3. The original decision to have employees working remotely came with the assumption that the company would save on real estate costs, which wasn’t the case. 

​IBM has not given reasons for this last point, but let me opine. The more open space you create, the more huddle, conference rooms, and collaborative areas you need. So the space leased does not end up being as small as envisioned. Second, the cost of setting up remote employees is getting more expensive, especially since they have hotel space in their permanent offices. Finally, turnover might be higher. There seems to be a lack of connection to the company when your worker is not in the office.  Real estate departments love boasting about how much money they saved (on face value) but not how many people left the company because they moved to an undesirable location. These are some of the negatives we have seen with our own clients who maintain remote workers. While there are a ton of great reasons to have remote employees, there’s always a downside.  

So here we go. Is this the beginning of moving people back into the offices? Will we see an increase in demand for in-office employees?  If they discover that employees become more productive, then yes. We know one thing for sure: This is a major shift for one of the world’s most iconic companies. Stay tuned as we watch this unfold.
 
If you are considering moving employees back to the mothership or allowing them to work remotely, call me.  We are working with clients every single day grappling with these issues.

RCC signature

602.954.3762
ccoppola@leearizona.com


IBM, a Pioneer of Remote Work, Calls Workers Back to the Office

Big Blue says move will improve collaboration and accelerate the pace of work

By John Simons
Image result for wall street journal logo
May 18th,  2017

pendulum-ibm

International Business Machines Corp. is giving thousands of its remote workers in the U.S. a choice this week: Abandon your home workspaces and relocate to a regional office—or leave the company.

The 105-year-old technology giant is quietly dismantling its popular decades-old remote work program to bring employees back into offices, a move it says will improve collaboration and accelerate the pace of work.

The changes comes as IBM copes with 20 consecutive quarters of falling revenue and rising shareholder ire over Chief Executive Ginni Rometty’s pay package.
 
The company won’t say how many of its 380,000 employees are affected by the policy change, which so far has been rolled out to its Watson division, software development, digital marketing, and design—divisions that employ tens of thousands of workers.

The shift is particularly surprising since the Armonk, N.Y., company has been among the business world’s staunchest boosters of remote work, both for itself and its customers. IBM markets software and services for what it calls “the anytime, anywhere workforce,” and its researchers have published numerous studies on the merits of remote work.

In the past, IBM has boasted that more than 40% of employees worked outside traditional company offices, and a May 4 post on the company’s Smarter Workforce blog stated that “telework works.”

IBM may be part of a broader rethink of remote work under way at large companies, as corporate leaders argue that putting workers in the same physical space hastens the speed of work and sparks innovation. Employers tread a fine line, however, since workers rate flexible-work programs highly, and research has found telecommuters often work more effectively than their cubicle-bound counterparts.

Yahoo Inc.’s decision to call telecommuters back to the office in 2013 set off a furor among employees and workplace experts. Yet more recent decisions at Bank of America Corp.and Aetna Inc. to greatly reduce telecommuting have elicited little outrage.

Big Blue’s leaders want employees to work differently now, said Laurie Friedman, a company spokeswoman. The company has rebuilt design and digital marketing teams to quickly respond to real-time data and customer feedback, collaborations that happen more easily when teams work shoulder to shoulder, Ms. Friedman said, adding that the “vast majority” of IBM’s telecommuters have chosen to join their teams in person.

Workers in affected IBM divisions have been given 30 days to decide whether to move to company-maintained office space that can be hundreds of miles away from their homes.

For example, marketing employees were invited to move to offices in Atlanta, Austin, Boston, Raleigh, New York or San Francisco, or leave the company. Some were given the option to move to Chicago. Those unwilling to move were also given 90 days to seek another role within IBM.

The changes have stunned longtime IBM employees like marketing manager Ron Favali. The 15-year company veteran has spent the past 12 years working from an office in his home outside Tampa, Fla., and considered himself a remote-work success story.

His team uses IBM’s Sametime instant-messaging voice and video chat software to stay connected and on task, despite being scattered in three states. Working remotely came with career trade-offs, he said. “I was never going to be named vice president of marketing for anything, but I’m OK with that.” He has declined IBM’s offer to return to a company workspace, and will leave the company next month to start a marketing firm out of his home.

Companies began offering generous remote work policies because they expected large savings in office and real-estate costs, said Jennifer Glass, a University of Texas professor who studies telecommuting and advises companies on remote-work strategies. Those savings haven’t materialized, Ms. Glass said, so workers are being called back to the office.

Relocating offices or asking employees to move can sometimes be read as layoffs in disguise, since a certain percentage of workers won’t be able to relocate.

IBM says its co-location plan isn’t a cost-saving measure. Ms. Friedman noted that the employees who can’t join an in-person team can apply for one of more than 5,000 open jobs in the U.S.

Working from the master bedroom in her Ogden Dunes, Ind., home, Penny Schlyer helped market IBM mobile software and services for companies reliant on workers who aren’t bound to a desk, such as retail employees, financial advisers or doctors.

Her seven years telecommuting with IBM could have been plucked from one of her marketing campaigns: She has logged work hours from the sidelines of her sons’ sporting events and used Sametime to communicate with her colleagues.
She was dismayed when IBM requested the 48-year-old mother of three move to the company’s New York City office. “The irony is definitely not lost there,” she said.

Though IBM offered to pay for the move and make a small cost-of-living adjustment to her salary, Ms. Schlyer declined. “I could never afford to live in New York City, and probably not anywhere close.”

She has found a new job leading product marketing for SA Ignite, a Chicago-based software company, but her office won’t change; she is still in the master bedroom.

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Categories Economy, Narrative, Office Market

2-Minute Phoenix Metro Office Update: Q2 2017

The second quarter was not quite as busy as the first, but there is still good news as our market slowly (painfully slow) continues to improve.  Vacancy held steady at 18.8% despite new construction, and we continued our streak of continuous positive net absorption (job growth).  We haven’t had negative net absorption since 2009.

The pace of net absorption slowed by approximately 500,000 SF in the second quarter, which is the amount of space State Farm absorbed in the final phase of its move to Marina Heights, last quarter.  We now stand at 1.4 million SF of office space absorbed at the mid-year mark.  We will need to absorb another 1.1 million SF in the second half of the year to meet our 25-year average.    

At the street level, my team’s transaction volume remains healthy and I anticipate Q3 will be noticeably better than Q2.  

Below is the link to our Lee & Associates Arizona 2nd Quarter 2017 Office Report and as usual,  here are my top 4 takeaways:  

1.  Downtown Action – Two of the top five leases occurred at the intersection of Central and Washington.  They symbolize a lot of the action and investment going on in our CBD, which helps the entire Metro market look good. Quicken Loans moved from North Scottsdale (the hottest submarket last cycle) into Downtown. Why? The buzz of a vibrant downtown.

2.  Sublease Space – There is 1.9 million SF of sublease space across the entire market.  Not all of it may be great space or have a significant amount of term left; but it means interesting opportunities for tenants and concern for landlords in certain areas. This is a new cycle trend as we have not seen 2 million feet of sublease in a long time.  

3. Lease Rates – Overall across the market, lease rates continue to grow (currently, they average $24.67/SF), but have still have not hit pre-recession levels ($26.55/SF).  Note, this is an average because rates have spiked to nearly $40/SF in a few key micro-markets.

4.  Recovery – Our recovery has come a long way this cycle, and we’ve done it without relying heavily on real estate related companies, like Metro Phoenix has done since there was an office market.  This means our market is increasingly becoming healthier and more diverse. Slower growth but great diversity bodes well for sustained momentum and a smoother ride as the inevitable down cycle comes.   

Need help with your lease or your building? Call or email me anytime.

AC for VR

602.954.3769

acheney@leearizona.com

 


Click Here to Read the Full Report

 

Q2 2017 Office Report

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