JARED LAAKE: A common joke among Dallas office brokers is “if you’re asked what year an office building was built and you don’t know; just tell them in the 80s and 90% chance you will be right.”
I was not around back then to see firsthand, but if half the stories I have heard are true, it was a heck of time to be a broker. Money was free and everybody and their uncle was a developer. Office buildings were throwing extravagant broker events to showcase the latest and greatest projects. Plus, there was no shortage in bonus/incentives being offered. It was the good ole days.
Fast forward to 2020
Commercial real estate is experiencing a cycle of rapid growth and new construction. However, what is to become of the now 30+ year old office buildings? Owners of these aging assets need to understand the new workforce and adapt accordingly or risk becoming obsolete.
Gone are the days when CEO’s main criteria for office site selection is proximity to their home. Years ago, they paid very little attention to the Human Resource Department or anyone else outside the C-Suite. Nowadays, the HR Manager has taken the lead on site selection. It’s not uncommon to see the HR manager on tours where their opinion and data are having a major impact. The number one question asked now is, “Can I recruit and retain top talent in this location?”
The math equation has changed. Now, commercial real estate costs are a much smaller fraction of the pie. The new calculation looks more like 1x operating expenses, 10x rent expenses, and 100x wages and employee retention. HR managers are looking for young talent for organizational growth, and to ensure that their facilities are up to par with what their competition is offering.
According to a Goldman Sachs study, Millennials (those born between about 1980 and 2000) are 59x more likely to endorse their company to friends and family if they have a great workplace. The future is now! By 2020, it forecast Millennials to comprise half of the American workforce, and by 2025, 75 percent of the global workforce. Long story short, average is dead and everybody wants better.
What does this mean for all the 1980s office buildings out there?
It is now more important than ever to invest in upgrades and new technology. The focus should be on curating, an experience that will allow your customers (tenants) to recruit and retain employees.
Checking the box by adding a gym, conference center, lounge, etc. does not get the job done anymore. Owners need to be conscious of who their target clientele are and generate that cool factor young professionals are looking for.
We live in the Instagram world. You don’t have to like it, but you better get with the program before you get left behind.
Article written by: Jared Laake
Jared Laake is a Vice President with Bradford Commercial Real Estate Services specializing in commercial leasing and brokerage. His responsibilities include Project Leasing, Tenant Representation, and Brokerage of office properties. Jared has extensive knowledge of the transactions in his submarkets and uses this information to exceed the expectation of his clients.