Office provider LABS has launched its 96,100 square foot flagship property LABS House in Bloomsbury, London that features coworking, offices, and full-service dining.
The argument on New York City office values
The REIT market trades at a significant discount to private market values and has made many effective arguments in its favor.
Net effective growth in New York has been muted due to new supply and capital expenditure requirements. As growth slows, the multiple paid for any assets also diminishes.
Tenants’ changing preferences are working against the antiquated office spaces that are still prominent in New York. Now, coworking firms and major companies are seeking out open floor models, natural light and elevator banks, but many bricks and beams in New York City weren’t configured that way.
The REIT discount has caused increased efficiency of office space. Now, employees mostly need just a laptop or device and good WiFi in order to be productive. With this, the amount of space needed per employee reduces from 250 square feet per person to just 50.
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All of these factors has slowed cash flow for office landlords and are beginning to beat out the premium New York brand name.
Still, the private market has many plausible rebuttals. The first being that REITs represent a portfolio of assets, meaning investors are buying the entire New York market. On the other hand, private investors can buy individual assets.
“REIT investors have the luxury of putting large sums of investment dollars to work in trailer parks as easily as they can the Empire State Building,” according to Alex Snyder, senior analyst with CenterSquare. “Private investors that need to deploy large sums of equity, however, generally do not have the option to allocate quickly across numerous small investments.”
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Cool office interiors are ideal at first glance, but looking into a company’s principles, such as gender equality and flexibility, will be the factors that retain talent.
Colliers International revealed the success of the office market last year due to high demand for coworking and tech firms, but predictions for 2019 are uncertain.
Shared office space providers as tenants have become the norm for many landlords and building owners, and now many REITs have adopted coworking as it continues to expand.
Brookfield Properties has teamed up with Convene to spruce up the 73,000 square foot Brookfield Place into a full-service events venue that accommodates up to 500 people.
Many coworking operators pride themselves on massive, rampant expansion, but some industry experts believe this growth could lead to failure and consolidation in 2019.
Coworking has expanded into many major markets of the nation over the past few years, but some firms are finding their client base to be working moms in the suburbs.
Howard Hughes, the development team behind Chicago’s Bank of America Tower, announced that luxury coworking brand No18 will take up two floors in the 55-story building.
WeWork has officially become one of Seattle’s largest office space occupiers, along with Amazon and Microsoft, and has a total footprint of about 1.7 million square feet.