Bookmarks: 5 Interesting Articles That May Help You This Week

Each week, I select a few articles that rise above the fray and hopefully help you on your journey in the CRE world. They pull from one of four "corners": corporate real estate, technology, management science and anything positive. I welcome your comments on these articles.

1. The Office Isn't Dead Yet. And Now's the Time to Get a Sweet Deal

At-home health testing service LetsGetChecked began 2020 growing at a fast clip and with plans to find a location for its next customer call center office. Then came Covid-19.

The New York City- and Dublin-based startup moved fast--it raised $71 million in the spring to develop an at-home Covid test and won FDA approval for it in May. As of July 2020, LetsGetChecked is seeing more than 800 percent year-over-year revenue growth.

While the company has begun to rapidly expand its customer care team, the virus has kept staff remote. But LetsGetChecked is continuing its search for office space, trying to take advantage of shifts in the commercial real estate market that have created opportunities for businesses not available even six months ago.

In the second quarter of 2020, office vacancies nationwide hit 13 percent. Available subleases made up 2.7 percent of all available space on the market, reaching a level not seen since 2010, according to an analysis by commercial real estate firm CBRE.

2. Transforming Aging Buildings Into Modern Workplaces

Everything old is new again. This adage comes to mind as organizations look for innovative ways of housing, inspiring and protecting their workforces. This doesn’t have to mean constructing shiny new buildings.

Workplaces are being constructed in aging commercial structures, as renovation repositions them for their next chapters. In fact, adaptive reuse creates an opportunity to not only update the aesthetics of a structure, but to push the envelope in design and construction by transforming aging buildings into high performing workplaces.

Renovating can translate into better resiliency for an organization. The move away from a typical cubicle grid setup to a more adaptive, activity-based office, with various types of spaces and reconfigurable work areas, allows businesses to pivot quickly and react to changes, such as the need for physical distancing.

3. Why Office Leases Are Getting Shorter And What That Means For Valuations

Tenant demand in the office market has been increasingly favoring shorter-term lease deals, a trend that complicates how much buildings are worth.

This shift has created more flexibility for tenants who don't want to be locked into a long-term lease, and it has helped landlords fill spaces in their buildings that may otherwise sit vacant. Despite the move toward shorter-term leases, office buildings still achieve higher valuations when they have the stability of long-term leases, and landlords have had to work to make lenders and investors more comfortable with the flexible deals their tenants crave.

Lease terms can have a variety of effects on a building's valuation, but experts agreed that buildings with longer-term leases are consistently more valuable than ones with shorter deals. But as the market evolves, some see a growing acceptance of lease flexibility that could increase the perceived value of more flexible leases.

4. Real Estate Notebook: Atlanta tech leasing volume near the top of U.S. markets, new apartments for Pullman Yard

Atlanta posted just over 722,500 square feet of leasing volume within its technology sector during the second quarter and saw the largest year-over-year increase in tech leasing activity of any U.S. market, according to new data from CBRE Group Inc.

The U.S. markets where tech companies leased the most space in the April-June period were Washington D.C., with 1.4 million square feet; San Francisco, with 774,607 square feet; and Atlanta with 722,517 square feet, CBRE said.

Atlanta’s office leasing volume driven by tech companies was up 71% from the same time in 2019. In contrast, San Francisco’s leasing volume fell by 74% and Manhattan’s by 72%.

5. S&P: Foot traffic to shopping centers reaching pre-pandemic levels

As retailers try to forecast demand going into the holiday season, customer behavior amid the pandemic remains a massive question mark, making it difficult to plan for product and cash needs, and generally making running a retail business very difficult.

S&P provides some needed good news for retail, though within it is a disparity between types of centers. And other data shows lingering declines in traffic. A tracker from another foot traffic analytics firm, Placer.ai, shows that shopping center traffic is still down about 27% year over year, while traffic to apparel retailers — which occupy many of those malls and outlet centers — is down 30%.

Still, according to Placer.ai's tracker, foot traffic in aggregate shows improvement from May and early June and vast improvement over the weeks when malls and retail stores closed during the spring while the country tried to slow the spread of COVID-19.

Your success blesses others. I wish you a great a hugely impactful week!

Ken Ashley