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Wins & Insights

Tenant Leasing Illustrated – Jan 2015 – Philae Phanatics and the Future of Leasing

Philae Phanatics and the Future of Leasing

On November 12th, the European Space Agency’s Rosetta spacecraft, on its mission since 2004, managed to catch up with, and land the Philae probe on, the Comet 67P/Churyumov-Gerasimenko.

Named after the Rosetta Stone and Philae obelisks used to decipher ancient Egyptian hieroglyphs, scientists hope the landing will provide a similar key to answer questions about the solar system.

Are you kidding me?!!

This may be the most impressive precision space maneuver since Hans Solo and the Millennium Falcon made the Kessel Run in less than twelve parsecs.

Back on Earth, my idea of precision is running the “spell check” before sending out a lease, and an impressive connection involves catching a commuter train while balancing a briefcase, an adult beverage and some take-out dinner.

All this futuristic news, combined with the close of another year, has me thinking about the future in commercial leasing.

Apparently not alone, there have been a number of studies and articles on the future of real estate in general recently, for example, CBRE’s “Fast Forward 2030” look at the future and the workplace, PWC’s “Real Estate 2020; Building the Future“, CNBC’s “7 Bold Commercial Real Estate Predictions” and The Real Deal’s “The Future of NYC Real Estate”.

Although much of the focus is global and there is a lot of mumbo jumbo about “workplace communities” and “holistic life”, there are many interesting ideas raised in these publications.

How might these prognostications affect commercial leasing? We have pulled out some trends for you to consider.

Cue Star Wars theme music. The following is our 2014 list of seven future commercial leasing trends:

  • Technology Entering Ludicrous Speed. While “location, location, location” might have been a real estate essential of the past, “technology, technology, technology” may be the coda for the future. This will be the case in terms of how space is marketed to and reviewed by tenants, but also how space is used once in the building. In fact, recent and potential future technological advances run through many of the bullet points below.​
  • A Jedi uses the Force for knowledge. The availability of information has grown enormously, with more and more being available online or through various apps. This added transparency and knowledge may lead to more fairness in pricing and efficient markets. Some wonder whether this will affect the future of real estate brokers as “middlemen”, although in our view commercial leasing brokers will become more valuable as the party that can harness and analyze all of this information and help tenants put it to practical use.​
  • Scotty, beam us up. New devices already allow tenants to use virtual reality and 3 dimensional technology to walk through as yet unbuilt space. Many in the field anticipate an ability for tenants to interact with such virtual space and actually change the space to meet their expectations (the analogy being the Star Trek, Next Generation “​holodeck“).​
  • Yoda, the Green Jedi. As cities and private owners look to cut greenhouse emissions and transition away from fossil fuels, sustainability has become a prerequisite, rather than a luxury. New technologies will allow “smart” buildings to monitor and control light, energy, air quality, water and heat levels and provide optimum data connectivity. Climate change may force behavioral changes. Some expect “living roofs” (i.e., “rooftop agriculture”), wind turbines and solar power to become the norm.​
  • Judge me by my size, do you? Already, the need for physical space is decreasing and tenants are looking to utilize high occupancy densities and advanced workplace design to save money and meet changing modes of working. Telecommuting, greater use of freelance consultants, the use of digital instead of paper files and video conferencing are all trends working towards smaller, denser facilities. Many businesses are also trending towards the technology campus look, with more open spaces, digital workstations, communal work areas and lounges and amenities.​
  • Adventure. Excitement. A Jedi craves not these things. Maybe, but most people do. And real estate developers may respond with more mixed-use development that brings lodging and residential uses together with office and retail uses. In Manhattan, we have seen more “creative” firms heading toward new neighborhoods that are not the standard downtown/midtown office areas to add other uses to the classic office/retail mix. Some also see landlords moving from providing the “hardware” of a physical space to a combination of “hardware and software” in terms of additional tenant services.​
  • Merchandising, merchandising, merchandising. Some expect malls and warehouses to go the way of the dinosaur. Other than those malls that produce the strongest revenues, many malls may need to be rebuilt more as entertainment centers in order to survive. With the increase of the digital marketplace and “just in time” inventory, warehouses will also need to adapt. Some envision a combination digital-brick and mortar store, similar to Apple Stores with the logistical and cost savings benefits of the internet together with the touch and feel of a traditional store.​

There are many changes brewing that will greatly affect the business world and the real estate industry is no exception. Remember to follow the advice of our little green Jedi friend when he said about commercial leasing “Do. Or do not. There is no try.” May the Schwartz be with you in 2015.​