Turning Office Space Into the Next CRE Opportunity
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
This article was updated on 11/14/23.
There are plenty of headlines in the news today about remote work. Despite the reality that plenty of people have always worked remotely, the idea of making your home into your primary office has caught on like wildfire. At the height of the pandemic, remote work was seen as not just a nice employee perk but the only way for many white-collar jobs to survive.
Here's the truth: while office vacancies did go up during the pandemic and despite the current turmoil surrounding the sector, that does not mean that office space is a thing of the past; in fact, the office space sector is turning a corner, thanks to conversion plans and back-to-office mandates.
First and foremost, not every company can successfully transition all employees into work-from-home positions. Professionals working with the public still need a place to go, and offices are still a very practical option.
The lines between work and home are blurring a little more every day.
Why Do Companies Still Need Office Space?
Competition between companies is quite high, which means that protecting sensitive information becomes a critical project. Unfortunately, data breaches aren't the only way to lose critical data. Bad actors can exist within organizations, misusing their access to send proprietary information to competitors.
Companies that deal in highly sensitive information often find that they still need office space. Other companies have found that, while they don't need to have everyone on site, having office space still makes it easy to get together when necessary. Just as some employees find that working offsite is a perk, others enjoy the chance to get away from the challenges of home and focus entirely on their work.
Monitoring Employees Is Easier in the Office
Monitoring employees is considered a delicate subject, but the truth is that not everyone is as trustworthy as necessary to uphold the principles of a company without some kind of monitoring. Companies of all sizes need to know who is accessing their systems and what they're doing with proprietary information.
The rise of remote work is certainly advantageous, but living and working in the same place can sometimes lead to distracted work instead of focused effort towards accomplishing business objectives.
Concerns over employee productivity, therefore, make the utilization of some sort of office space a reasonable compromise. Employees still have autonomy over their work, but it is much easier for some to focus away from home than to produce the same high-quality work at home with pets, children, and other obligations nearby.
Benefits of Office Space
So, not convinced about office space yet? That's completely understandable, especially as so many people are indeed discussing working from home openly. Good office space is incredibly valuable in a post-pandemic world for the following reasons:
- Familiarity: Instead of messing with event halls or other temporary spaces, employees are accustomed to driving into the office.
- Centralization: A designated office space means that everyone always knows where to go, all the time, with less opportunity for communication issues.
- Savings: Instead of carrying equipment from place to place, everything remains in the office, and this lowers storage costs and allows the money to flow to other business objectives.
Other benefits of office space are less tangible, such as the ability to better tie-down corporate identity with a designated location instead of an entirely digital one.
Tips to Get the Right Commercial Real Estate for Office Space
If you're looking into getting commercial real estate that can lead to good office space, there are a few things that you need to know before diving in head-first. It's better to stop and do your research than commit to one listing or another.
Here's what you need to know:
- Consider the location. Just like residential property, CRE still follows the same principles of the location being extremely important. If you don't know a location offhand, try to look it up on Google Maps or Google Earth for more information.
- Think about the space offered. Not all spaces are created equal. If you already know the type of businesses that you're seeking as renters, start looking at whether or not the space offered would be ideal for your future renters.
- When looking at available listings, don't forget the financials: How much does it cost to maintain the space in the event of vacancies? What repairs and upgrades are needed in order to make it competitive in the marketplace?
Keeping these points in mind will make it much easier to get the right commercial space to add to your real estate portfolio.
Other Considerations for Purchasing Office Space
Purchasing the office space itself is only the first step of the journey. Turning the office space into a place where other businesses want to rent is the next part. You will need to look at the available properties for sale with a careful eye, as you'll undoubtedly have repairs to handle. Even a well-maintained space will likely need a few updates.
If you're going to attract businesses to your building for office space, it's important to begin thinking about what those lease agreements will need to look like. Commercial real estate is different in many ways from its residential counterpart, as agreements tend to be more open to negotiation.
Consulting with a commercial real estate attorney is wise when drafting your first few agreements. Being able to set terms that are favorable to your investment opportunity while still encouraging businesses to rent your space is a balancing act, and professional legal advice can help greatly with this process.
Having money available to market the property to the type of businesses that would love to rent your space is also important. Don't spend your entire budget on purchasing the office space without leaving funds available to rework and market the space.
Impartial Research Is Key
With the right property, office space can certainly turn into the next commercial real estate opportunity. Research is the difference between getting the best space possible and turning it into a lucrative part of your real estate portfolio. It's an investment, and remaining impartial during the search for the right office space is extremely important.
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