Categories Narrative, Office Market

1-Minute Phoenix Metro Office Market Update: Q4 2018

It’s time for us to look back at the Metro Phoenix Office Market for 2018. Readers of this narrative know that I am an office broker who works every day representing tenants and landlords as they navigate real estate nuances and opportunities. I (along with my incredible team) am based in Phoenix but work around the country and internationally as well. We are hired for all kinds of reasons including our in-depth, up-to-the-minute market knowledge.
 
Here is the latest…
 
The Metro Phoenix Office Market tightened in 2018 and is expected to follow the same script in 2019. This is not happening across the rest of the country. Phoenix is poised to continue growing longer and in a more robust fashion than the vast majority of U.S. cities. The Valley of the Sun’s value proposition continues to persuade existing companies to expand and entice new groups to experience the region. Simple as that.  Net absorption of office space (the key measure of job growth) improved dramatically from 2017’s figure of 1.8 million square feet (SF), to 2.8 million SF in 2018. Vacancy started 2018 at 19.7% and ended the year at 17.6% — the lowest vacancy since 2008.As vacancy drops, Class A lease rates have increased, albeit a small amount, to an average of $29.28/SF at year end 2018. We are set to hit an all-time high in 2019 with Class A average lease rates expected to eclipse $30/SF across the Valley. Additionally, available sublease space decreased from 2.5 million to 1.9 million SF during the year.
 
Below is a link to our Lee & Associates Arizona Fourth Quarter Office Report and as usual, I’ve included my top 3 takeaways:
 

  1. It Pays to be the Value Option — The Sky Harbor Airport submarket absorbed the most space in 2018 (869,833 SF). Asking rates in this area are $6/SF lower than the market average and clearly a price refuge for tenants. There is rate shock for tenants as leases expire. This will continue in 2019. 
  2. Co-working is Ramping Up — WeWork entered our market with a 54,000 SF lease in the Esplanade I at 24th Street and Camelback, one of the top five leases of the quarter. Right now, WeWork is negotiating at other locations around the Valley and will add to over 450,000 SF of existing co-working operations including Serendipity Labs, Industrious, Workuity, Co+Hoots, etc. (All Regus Executive Suite units are not included in this figure)
  3. Expect Lease Rates to Climb In 2019 — WHY? Tenant demand remains strong and will likely outpace new supply again this year. Additionally, high construction pricing is forcing landlords and tenants to reduce concessions or inflate rates to make deals pencil.  (Make sure you have a good broker looking out for you!)

Want to talk more about these trends or how I can help you with your office space?  Give me a call. 

Andrew

602.954.3769

acheney@leearizona.comPS- Here is a link to Lee & Associates Arizona’s Historical Office Market Statistics with some great information as well.


Click to Read the Report
Q4_OfficeReport First Page
Categories Narrative

What do Baseball and Commercial Real Estate Have in Common?

Some of you may know that I was drafted out of college and played professional baseball for the Minnesota Twins organization before I got into Commercial Real Estate.  If you play baseball, you learn statistics. As sportswriter Arthur Daley said:  “A baseball fan has the digestive apparatus of a billy goat. He can, and does, devour any set of statistics with insatiable appetite and then nuzzles hungrily for more.

I follow stats for our Commercial Real Estate business just like when I was still playing baseball. Check out our 2018 numbers below.  If you want more, trust me, we have them — we track all kinds numbers for the market, current trends, and for your building(s).

Our team had another incredible year in 2018 and are so grateful to our clients, friends and family like you.  We look forward to another year of hustling, working for our clients, and giving them best of class service.  We invite you to work with us, we promise you will be completely satisfied.  

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 Click Here to View the Full Graphic

 

Craig

602.954.3762

ccoppola@leearizona.com

P.S. Every year, the Lipsey Company lists the Top 25 Brands in an Annual Commercial Real Estate Rankings. We want to ask you to take a moment to vote for us. Cast your vote here and write in “The Coppola-Cheney Group”. Note: it will make you fill out all the fields, so feel free to put us for all the others too 🙂 

 

 

 

xxx

Categories Creative Office Spaces, Narrative, Open Offices

Piling On

I’m adding to my narrative two weeks ago (click here to read) on the effects of open office plans.  Today is not about the science but rather the complaining and emotional impact on employees after moving to open office space.  I’m not taking a side, rather just piling on more information from two weeks ago. 
 
Workers are simply not as happy in open spaces. They are 15% less productive (depending on the type of work), more likely to get sick, and more.  This is interesting. Some people want open collaborative space and others beg for an office where they can “get my work done”.  This is exacerbated by the fact that your best team players are probably getting recruited by other companies who might be offering them an alternative. 
 
The workforce is in a major shift in demographics and what do new workers (millennials and Gen X) really want?  Who knows anymore?   Based on our experience completing 125 leases every year, I can say with conviction that—it depends. Here are a few of the questions we ask our clients as we begin the process and to set direction:
 
1—How do you and specifically your teams work?  What type of work is being done and what is the need for interaction?
2—Who is your best cohort you hire?  Where do you get them from and why?  What is your turnover rate and why?
3—What happens in a recession? (During recessions, businesses fight to stay in business and cutting costs becomes more urgent.)
4—What do you have now?  What works and what doesn’t? 
 
I won’t continue to harp on this topic.  I just thought I would spend a couple narratives looking at open office from a different perspective. Has the pendulum swung too far to open offices with over 70% of all offices now open?  What are your thoughts?  Let me know.  

 

Craig

602.954.3762


Why open offices are bad for us
By Bryan Borzykowski

Wednesday, July 11, 2018

open office space

Four years ago, Chris Nagele did what many other technology executives have done before — he moved his team into an open concept office.

His staff had been exclusively working from home, but he wanted everyone to be together, to bond and collaborate more easily. It quickly became clear, though, that Nagele had made a huge mistake. Everyone was distracted, productivity suffered and the nine employees were unhappy, not to mention Nagele himself.

In April 2015, about three years after moving into the open office, Nagele moved the company into a 10,000-square foot office where everyone now has their own space — complete with closing doors.

We’re 15% less productive, we have immense trouble concentrating and we’re twice as likely to get sick in open working spaces

Numerous companies have embraced the open office — about 70% of US offices are open concept — and by most accounts, very few have moved back into traditional spaces with offices and doors. But research that we’re 15% less productive, we have immense trouble concentrating and we’re twice as likely to get sick in open working spaces, has contributed to a growing backlash against open offices.

Since moving, Nagele himself has heard from others in technology who say they long for the closed office lifestyle. “Many people agree — they can’t stand the open office,” he says. “They never get anything done and have to do more work at home.”

Small distractions can cause us to lose focus for upwards of 20 minutes

It’s unlikely that the open office concept will go away anytime soon, but some companies are following Nagele’s example and making a return to private spaces.

The more focus the better
There’s one big reason we’d all love a space with four walls and a door that shuts: focus. The truth is, we can’t multitask and small distractions can cause us to lose focus for upwards of 20 minutes.

What’s more, certain open spaces can negatively impact our memory. This is especially true for hotdesking, an extreme version of open plan working where people sit wherever they want in the work place, moving their equipment around with them.

We retain more information when we sit in one spot, says Sally Augustin, an environmental and design psychologist in La Grange Park, Illinois. It’s not so obvious to us each day, but we offload memories — often little details — into our surroundings, she says.

We retain more information when we sit in one spot

These details — which could be anything from a quick idea we wanted to share to a colour change on a brochure we’re working on — can only be recalled in that setting.

We don’t collaborate like we think
For many of us, it’s the noise that disturbs us the most. Professors at the University of Sydney found that nearly 50% of people with a completely open office floorplan, and nearly 60% of people in cubicles with low walls, are dissatisfied with their sound privacy. Only 16% of people in private offices said the same.

They asked people in various office types how dissatisfied they were with their space  and in 14 different respects, including temperature, air quality and sound privacy, closed fared better than open.

People do talk to each other more, but they don’t talk to each other more about work-related things

Beside the cheaper cost, one main argument for the open workspace is that it increases collaboration. However, it’s well documented that we rarely brainstorm brilliant ideas when we’re just shooting the breeze in a crowd. Instead, as many of us know, we’re more likely to hear about the Christmas gift a colleague is buying for a family member, or problems with your deskmate’s spouse.

People do talk to each other more, but they don’t talk to each other more about work-related things,” says Augustin. Think about it: if you work in an open office, you’ll book a meeting room to brainstorm. It’s still an act that requires some level of planning and privacy.

And it turns out our best work is done when we have total focus, says Augustin. We can work in a busy space, but the final product won’t be as good as if we are in a quiet locale.

It’s a shame to waste people by not giving them a place that supports what they actually do

“[It’s] inefficient,” she says. “It’s a shame to waste people by not giving them a place that supports what they actually do.”

Of course, she says, it’s important for us to bond and to get to know each other. But there are plenty of ways to bond in closed offices. Nagele’s team, for instance, eats lunch together every day. A few ideas come out of lunch time chats, he says, but most are developed from more focused brainstorming sessions.

Finding the right balance  
For jobs that require focus,  like writing, advertising, financial planning and computer programming, some companies that aren’t ready to ditch open plans are experimenting with quiet rooms and closed spaces.

Some of us even feel that escaping to a quiet room is a sign of weakness

The trouble with that, is some of us don’t feel comfortable leaving the team to go off on our own—it can feel as if we’re not pulling our weight if we’re not present. That’s particularly true in high-pressure environments. Some of us even feel that escaping to a quiet room is a sign of weakness, Augustin says.

Other companies are creating closed spaces for smaller teams. Ryan Mullenix, a partner with NBBJ, a global architecture firm, has worked with tech firms that have built offices for between three and 16 people.

They can still collaborate, but they can also block out noise from other teams of people they don’t need to hear from. Technology can also help. Mullenix’s own office has sensors, placed 10 feet apart, that can track noise, temperature and population levels. Staff can log on to an app and can find the quietest spot in the room.
 
People can now do focused work and they have more time to work

Against the grain
Some of us thrive in open offices. Those who do repetitive tasks represent one group. Another: more junior employees. For them, it’s easier to learn by watching how others work. If new-to-work staff get their own office from the start, they may lose focus and perform at a lower level, Augustin says.

The bad news for unhappy open-office dwellers: the concept isn’t going away any time soon.  But, says Nagele, more companies should consider what he’s found. His employees are happier and more productive—and that helps not just the company, but the team.

“People can now do focused work and they have more time to work,” he says. “That’s helped everyone’s mindset.”

Categories Creative Office Spaces, Narrative, Open Offices

Open Plans Kill Productivity

In my ongoing effort to explore both sides of the open office vs. traditional office debate, here are some thoughts based on science.  The Journal of Environmental Psychology jumped into the fray and came out with a huge study (40k+ workers and over 300 companies).  What did they find out?
 
— Closed offices outperformed open offices for productivity.
— Proxemics issues (how people feel when close) create uncomfortable workers (and therefore less productivity).
— Noise and visual disruption (or as Geoffrey James says below “visual and noise pollution”) creates distraction and focus issues.
 
Read below for more.  The debate continues and there are fatal flaws to both sides.  

 

Craig

602.954.3762


Open-Plan Offices Kill Productivity, According to Science

By Geoffrey James

Wednesday, July 11, 2018

Earlier today, I got a story pitch on the “office of the future” that featured the following bullet points:

  Remote Work Will be the New Norm: According to recent Fuze research, 83 percent of workers don’t think they need to be in an office to be productive, and 38 percent said they would enjoy their job more if they were allowed to work remotely.
  Physical Space Will Shrink: We’ll see more companies shift to a more collaborative office space model with workspaces that bring together teams, spark conversation, and create the best ideas.
  Traditional Desks Will Disappear: The so-called cubicle farm will become a distant memory and people will start embracing an environment that suits their needs — whether it be a table at a coffee shop, a standing desk, or collaboration space.
  “Office Hours” Will Become Obsolete: The workday isn’t 9 to 5 anymore, it’s 24/7. In fact, a recent Fidelity survey found that Millennials will take a pay cut for a more flexible work environment.

The list (which is very much “conventional wisdom”) illustrates the crazy-making way that companies think about open-plan offices. Can you see the disconnect? Bullets 1 and 4 are saying that people don’t want to work in an office, while bullets 2 and 3 are defining the very office environment where people don’t want to work.

And isn’t that the sad truth? Most people would rather work at home and or tolerate angry stares from the other patrons in a coffee shop (should one need to make a call) than try to get something done in an open-plan office.

In previous posts, I’ve provided links to numerous studies showing that open-plan offices are both a productivity disaster and a false economy. (The productivity drain more than offsets the savings in square footage.) I’ve even posted some videos showing how wretched (and in some cases ridiculous) these environments truly are.

Well, just in case you weren’t yet convinced, here’s some new evidence from a study of more than 40,000 workers in 300 U.S. office buildings–by far the most comprehensive research on this issue. The results, published in the Journal of Environmental Psychology, came to the following conclusion:

“Enclosed private offices clearly outperformed open-plan layouts in most aspects of IEQ (Indoor Environmental Quality), particularly in acoustics, privacy and the proxemics issues. Benefits of enhanced ‘ease of interaction’ were smaller than the penalties of increased noise level and decreased privacy resulting from open-plan office configuration.”

Don’t let the jargon confuse you. The term “proxemics issues” refers to how people feel uncomfortable when they’re forced into close proximity with other people. To be perfectly clear, here’s what the paragraph says: “Open-plan offices aren’t worth it.”

BTW, it isn’t just the noise and the interruptions that cause people to hate open-plan offices. According to a recent Wall Street Journal article:

“All of this social engineering has created endless distractions that draw employees’ eyes away from their own screens. Visual noise, the activity or movement around the edges of an employee’s field of vision, can erode concentration and disrupt analytical thinking or creativity.”

Unlike noise pollution, which can be remedied with a pair of headsets, there’s no way to block out the visual pollution, short of throwing a towel over your head and screen like a toddler’s play tent.

So, getting back to the story pitch and the conventional wisdom it represents: Yes, indeed, people want to work at home, and yes, indeed, they’re willing to take a cut in pay to get away from the open-plan office that you’ve offered them.

What’s weird is that the people who design office spaces and the executives who hire them don’t see the connection. They seem unable to understand that forcing open-plan offices down everyone’s throat is not only ruining productivity but it’s actively driving good employees to avoid to coming into the office.

So let me make it simple.

Dear Executive: Do you want your employees to come into the office and work long hours while they’re there? THEN GIVE THEM PRIVATE OFFICES. At the very least, give them high-walled cubicles that provide a modicum of privacy.

For crying out loud, is this really that difficult a concept to understand?

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