4 ms·
As the market endures a historic shift in demand away from big block towers due to remote work and skyrocketing cost of building opex services, The traditional
by ethagknight 2y ago
As the market endures a historic shift in demand away from big block towers due to remote work and skyrocketing cost of building opex services, The traditional 7 to 10 year lease for office space no longer pencils on all but the most expensive office space. And not by a longshot.
However, there is real appeal to the value of a professionally managed a+ location high rise with views and a curated tenancy.
We really need a new format of high-rise design that diversifies the ownership and risk on a per-floor basis. high-rise office cownership should look a lot more like a condo association, in the physical building needs to be modified so that some common systems are broken up into per-floor systems (mainly just HVAC; convert a single huge chiller/cooling tower combo to per-floor heat pumps. Suboptimal under peak load but far more flexible, risk tolerant and far lower cost capex)
Smaller bites of ownership dramatically broadens the ownership opportunity and potential market reach of a given 30,000sf block/floor of tower. Similar to the stock market democratizing corporate investment. Big players can still play right along side the small businesses and private investors. It even derisks ownership of a high rise because a 1m sf office tower now has two target customers, a massive reit or a diversified flock of private investors who don’t need to know each other.
“Dont we already have that in X Y Z?” Yes but no, and that’s a large part of why these buildings are selling for cents on the dollar. The customer/payer is too far removed from the risks and benefits of ownership of this asset class, and the fundamental design of the building systems carries too much maintenance risk.
In other words, as a real estate professional, I would like to see diversified, smaller “dumb money” in this office asset class, which can be far more patient an opportunistic (or unwise, tomato tomahto) than a major REIT