There’s absolutely no denying the fact that high-tech startups have had a huge impact on the commercial real estate market over the past few years. According to data from CBRE, tech companies were responsible for 14% of all major leasing activity in 2013, with that number increasing to 20% in 2014. And in some markets, such as Washington D.C., tech companies have accounted for more than one-quarter of all new leases.
Despite the recent rapid growth of the technology sector, numerous other business and industries are experiencing changes and evolutions of their own. In order for real estate professionals to stay competitive they will need to understand the changing demands of these tenants and how they can prepare to meet these needs going forward.
With the rise of e-commerce, retail companies have been forced to re-evaluate how they do business. As customers continue to search the web for everything from clothing and groceries to auto parts and office supplies, retail establishments are relying on shrinking storefronts, better locations, and an increased online presence. From a real estate management perspective, this means a greater number of small leases and an increased focus on high-traffic locations.
Financial service companies have always been at the forefront of technology, but in today’s tech-driven environment there’s an even greater need for reliable connectivity and high-speed internet access. In an industry where a split-second can have serious financial implications, modern financial service companies will skip right over properties without a well-appointed tech infrastructure and multiple broadband services providers offering redundant connections.
Medical and Legal Services
In years past, medical and legal service providers needed to lease extra space to house record storage and research libraries. But now that an increased number of doctors and law offices are going “paperless”, and the entire collection of human knowledge is accessible on our mobile devices, the demand for this additional square footage is quickly diminishing. One thing that isn’t changing in this sector though, especially among the growing demand for flex space, is the need for private rooms for confidential meetings and conversations.
Just as with retail, the popularity of e-commerce is having a big effect on the way in which companies search for and utilize industrial and warehouse properties – especially in major metropolitan areas. In big cities, we’re seeing an emphasis on the quick shipment of products, with companies like Amazon offering same-day delivery in sixteen different markets. This is leading to tenants shying away from operating a few massive distribution and fulfilment centers and instead focusing on a greater number of smaller regional locations. Not just any old building will suffice, however: with the importance of connectivity in today’s supply chain operations, industrial tenants are commonly searching out space that is just as well connected as modern office properties.
While it may seem like tech tenants are taking over commercial real estate, they still only make up a minority of all leases. There’s no doubt that these technology companies will continue to play a prominent role in property leasing and management over the coming years, but that doesn’t mean real estate professionals can overlook the technology changes happening in other sectors and industries. As these advancements continue to reshape the world, the savvy brokers will be the ones who understands the demands of their clients’ businesses and are willing to adapt their properties and practices to meet those evolving needs.