Op-Ed, Commercial Real Estate, Bay Area
greg fogg
TenantSee Weekly: Knowing Your When

We see a lot of confusion in the market around when to begin negotiations.  It’s not an insignificant consideration.  In fact, when you begin can make a huge difference in the outcome.  It’s understandable that tenants would not know when to start.  Brokers are not always keen to start at the right time, since compensation is derived by transacting and the closer the tenant is to lease expiration, the faster it will need to transact (and the fewer options it will have).  Good for the broker, bad for the tenant.  This creates a misalignment of interests that discourages thoughtful consultation on the front end – the more time a broker spends on a project, the lower the compensation. 

TenantSee Weekly: Knowing Your When
Op-Ed, Commercial Real Estate, Bay Area
greg fogg
TenantSee Weeky: A Big Decline in Rents, Four ...

Throughout 2020, the prevailing sentiment among investors in the San Francisco office market was one of relative optimism.  After all, despite the fact tenants were prohibited from occupying their buildings, they continued to collect full rent.  The buildings were full, with vacancy hovering around 4%.  Sure, companies weren’t happy about paying for space they couldn’t use, but business was good.  In many cases the tech sector (which makes up most of San Francisco’s office occupancy) was booming due to an even greater reliance on and usage of tech caused by pandemic driven changes in how people were living.  Throughout the course of 2020 there was no reason for San Francisco investors to panic, as few (if any) office occupiers were showing signs of developing long-term hybrid or remote-first strategies.  Most were simply focused on solving for ongoing operations as a temporary reaction to the pandemic.  Yet early indicators did point to a future in which companies would be shedding office space, as some expiring leases were not replaced.  This, coupled with the addition of new supply, caused a big increase in vacancy to nearly 12% by year end.  Despite this large uptick, the brunt of the sluggish demand dynamic was being felt in the sublease markets, where rental economics more accurately reflected the true state of the market.  Despite a total closing of the office market in 2020, average asking rents ended the year off just 6% from the pre-pandemic high.

TenantSee Weeky: A Big Decline in Rents, Four Years in the Making
Bay Area, Commercial Real Estate, Op-Ed
greg fogg
TenantSee Weekly: Modern Workplace Planning: ...

In the years leading up to the pandemic, most medium and small companies defined their office space need based on headcount (current and projected), space programming, and industry/sector norms.  The exercise was mostly formulaic.  The primary differences in the offices of a small, regional law firm compared to those of an AM Law 100 firm would be scale, the cost of finishes, and the quality of the building and views.  It was planning for the same outcome, just at different levels on the cost spectrum.  Companies having a larger portfolio of offices would typically create a “workplace strategy” that included guidelines around programming (e.g., space layout, office size, critical adjacencies, growth factor, finishes, FF&E, etc.).  These guidelines could then be used to inform the real estate process across geography.

TenantSee Weekly: Modern Workplace Planning: Solving for Experience Part I: The Purpose
Bay Area, Commercial Real Estate, Op-Ed
greg fogg
TenantSee Weekly: This, or That?

Negotiations are always about (or should always be about) this or that.  There’s always something else, maybe that something else is nothing (as in sometimes the best thing to do is nothing at all).  Decisions made without proper consideration of all relevant alternative scenarios are decisions made poorly.  As important, in the context of office lease negotiations, the best negotiated outcomes are directly correlated to the extent to which we understand the alternatives of the landlord counterparty.  This is a bit counter intuitive, allow us to explain. 

TenantSee Weekly: This, or That?
Bay Area, Commercial Real Estate, Op-Ed
greg fogg
TenantSee Weekly: I Digress...

A little AI distraction to cheer your day (and relieve us of yet another discussion about workplace). Ever wandered through the streets and felt like you've stepped into the future? With their undeniable presence here in San Francisco, the driverless car is quickly becoming the most prominent representation of AI in our daily lives. If you spend any time in San Francisco neighborhoods, you can’t miss them. The other day, as I chatted with a neighbor, I counted 6 autonomous vehicles casually cruise by our front door within a span of 10 minutes. Intriguing, right? And today, in a twist of irony, I was held up by one. Blocked by a double-parked UPS truck, the driverless car hesitated, unsure about navigating into the lane of oncoming traffic. Of course, all the drivers in the opposing lane weren’t too keen to make space for the driverless car, as one normally would (or at least the more decent among us would) for a human-driven vehicle. Hence, we waited.

TenantSee Weekly: I Digress...

#culture

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TenantSee Weekly: What Comes Next For Office

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TenantSee Weekly: What Comes Next For Office

We’ve noticed an interesting shift in how companies are thinking about their offices.  For some time now, many companies have resolved to employ a hybrid approach to workplace, having employees work in office for a designated number of days each week.  In many cases, this solution was chosen more for how it seemingly struck a compromise between employers who wanted employees in the office and employees who sought freedom to choose.  To date, companies have been relatively lax in enforcing their workplace plan.  What’s changed?   Leadership is now becoming increasingly frustrated at spending on underutilized real estate.  Companies track space usage, and they don’t like what they’re seeing.  The occupancy reality is often way below what it would otherwise be if employees were following the hybrid work policy.  The company leasing 10,000 sf to accommodate an average of 10 workers each day is (painfully) aware of the wasted spend. 

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TenantSee Weekly: Pandora's Office: Part IV - Wearable Work

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TenantSee Weekly: Pandora's Office: Part IV - Wearable Work

Today, we examine the transformative role of Artificial Intelligence (AI) and automation in the workplace.  AI will have broad impacts on work in the information economy, both in how and where work is done.  While it's true AI and automation could lead to significant job displacement, it’s also true that AI will create new jobs.  Studies suggest that AI will affect job transformation more than destroying jobs, altogether. It automates parts of jobs, not whole jobs. The nature of some roles may change, requiring a focus on skills that AI can't replicate – creativity, critical thinking, emotional intelligence, and complex problem-solving.  For those at the top of the food chain, this shift will make jobs more strategic and rewarding, enhancing employee engagement and productivity.  Yet jobs at the lower end of the white-collar spectrum will be susceptible to displacement.

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TenantSee Weekly: Pandora's Office: Part III - Decoding Productivity

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TenantSee Weekly: Pandora's Office: Part III - Decoding Productivity

Productivity. The backbone of a company’s success. For decades, productivity has served as a key determinant of growth and profitability. Measuring productivity, however, is a different beast. Amid the shift towards remote working, understanding productivity dynamics in both office-based and work-from-home environments has become increasingly pertinent.  Unfortunately, the idea of productivity has become one of the battle grounds on which the fight over RTO is being waged.  Too often, companies and employees point to misleading and/or ill-defined measures of productivity as evidence their view is right.  It’s important to be fact-based and sober in assessing productivity.

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TenantSee Weekly: Pandora's Office: Part II - The Psychology of Workspace

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TenantSee Weekly: Pandora's Office: Part II - The Psychology of Workspace

One of the positive outcomes emerging from a more holistic contemplation of work is a better understanding of how the behavioral and design elements of the workplace impact well-being, the psychology of the workplace.  Historically, the physical office and the culture that accompanied it, was largely a one-size fits all, top-down dictate that employees were not encouraged to question.  While this one-dimensional approach may have been easier to conceive, it had the detrimental effect of failing to adequately support some percentage (maybe a large percentage) of the employees.  But it’s a new day, a time when we have increased awareness of neurodiversity and sensory processing, an opportunity to provide optionality in support of the broad spectrum of employee (human) differences.  It’s a moment when we can more fully contemplate the psychology of the workplace.  Indeed, the more thoughtful we are in creating workplaces that cater to diverse employee needs, the better these environments will serve the organization.

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TenantSee Weekly: AirOffice

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TenantSee Weekly: AirOffice

Have we reached the point at which the office product might be consumed like the hotel, or the homes and rooms rented on platforms like Airbnb?  We’re certainly moving in that direction. Companies like Upflex (a Cushman & Wakefield partner), The Instant Group and others aggregate global facilities for easy access via technology apps. This transition resonates with the growing demand for flexible, location-independent work solutions, allowing employees to effortlessly book an office space wherever required.  I’m in Denver, I go to my app, enter my requirements (much like I would do on Airbnb) and, voila! my space is ready. The question is: are we ready to redefine our workspace consumption in line with the on-demand economy?

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TenantSee Weekly: Unusual Times

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TenantSee Weekly: Unusual Times

Want to know how strange things have gotten in the San Francisco office market?  An empty office building now costs less on a per square foot basis than it will cost to build new interior space in the same building.  Cushman & Wakefield’s Project Development Services team has recently released an Office Fit Out Cost Guide (report is here) which indicates the average cost to build new space from shell in San Francisco stands at $222/SF.  Now consider that a building like 350 California Street is rumored to be getting buyer interest at around $200/SF. 
 

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TenantSee Weekly: Why Are You Doing That?

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TenantSee Weekly: Why Are You Doing That?

We’re excited to promote our upcoming event at Café TenantSee, “Why Are You Doing That?”.  For the uninitiated, Café TenantSee is an intimate quarterly in-person event designed to provide highly relevant, useful insights and perspectives for office occupiers.  The café opens at 8:45 am on Tuesday, April 25, 2023.  Come and order a specialty coffee or tea drink from our expert baristas.  Light breakfast is also provided. Our program runs from 9:30 to 10:30.  Unfortunately, our café is small.  We can only accommodate 50 attendees, so space is limited.