The almost overnight move to work from home combined with the wait for a vaccine has changed how companies are viewing commercial real estate and office space. Reuters reviewed second quarter earnings calls and reported that “25 large companies plan to reduce their office space in the year ahead.”
The question on many executives minds is how can Commercial Real Estate be Repurposed? We asked Global Mastermind Accelerator Members Michael Young and Michelle Galvani to share ideas on reimaging Commercial Real Estate.
The Pew Research Center delivered a report in Jan 2020 that confirmed what many people have suspected for decades: “Upper-income households have seen more rapid growth in income in recent decades” than middle or lower-income households. Their research shows that most American families aren’t any better off now than 20 years ago.
While an excessive amount of unused commercial real estate undoubtedly poses a variety of short-term economic challenges, repurposing it provides an incredible opportunity to help middle and lower-income households recover some of their lost economic ground.
Housing and reliable food sources are the foundations of healthy communities and are critical for the growth of the population segments most threatened by recent economic changes. With the right zoning, technologies, and tax incentives to motivate property owners, commercial real estate of all types and sizes (and particularly unused office space) could be transformed into the communities and economic growth engines of tomorrow.
Between a growing city and stagnant wages, affordable housing is a major need in Atlanta for tens of thousands of residents. To that end, Atlanta Mayor Keisha Lance Bottoms unveiled a plan in mid-2019 to create 20,000 affordable homes by 2026. If the city were to partner with owners of underutilized commercial properties to create residences within some portion of a building, it would eliminate the city’s need for land purchase, the exercise of eminent domain, and more – expediting the arrival of this much needed housing. Construction Dive magazine reports that reusing commercial buildings usually costs “15% to 20% less than their ground-up construction counterparts.” So reusing commercial buildings could also be a cost savings for the city.
The technology is here today to help feed families by growing food indoors too. Companies like Square Roots allow 340 sq ft to produce the same amount of food as a three-acre farm. Given the tremendous amount of underutilized commercial real estate, this technology could form the foundations of both a food source for residents and an economic driver for excess food that is sold on a local market. Given the population density in these areas, having food grown so close to its consumption reduces both spoilage and the energy required to bring food to market.
If more people are living and growing food in unused commercial buildings, there will be higher demand for services to support them. Everything from stores to restaurants to service providers could co-locate on the first floor or few, much as they do in today’s mixed-use developments. While working from home may be commonplace for many people, those that do not could find employment in these near-by businesses. This would reduce their commute and carbon footprint, while also improving their quality of life and feeling of community.
While mixed-use developments have been around for over 20 years, recent changes from the pandemic have unlocked a huge opportunity for us to reimagine what the term really means. More than just homes stacked on top of offices or stores, underused commercial real estate properties could become all-inclusive, largely self-sustaining communities of the future that feed and provide economic opportunity for their residents. Our future is ripe for building!
The E-Commerce business grew $60.42 billion in the second quarter this year over the same period last year. As companies pivot to the direct to consumer (DTC) service model, the demand for fulfillment facilities is outpacing supply across the country. Additionally, as these companies adopt, refine, and integrate supply chain optimization technologies and reimagine their operations, their facilities will be transformed into smart warehouses, something Amazon has already done.
Hamid Moghadam, Chairman and CEO of Prologis, the largest owner and operating of industrial real estate in the US and Amazon’s primary Landlord, estimates that e-commerce customers need 1.2 million square feet of distribution space per $1 billion in company sales, an amount that is three times the space required by traditional distribution models.
Some industry leaders estimate the need for an additional one billion square feet of distribution space in the next five years to accommodate e-commerce growth. The most desirable locations for last-mile players include proximity to major metropolitan areas with adequate ingress/egress that can accommodate fleet vehicle parking. Amazon is repurposing big-box retail locations, vacated by companies that were not able to survive the impact of the pandemic. Another bold move by Amazon that pre-pandemic city officials and landlords would never have considered approving. Expect this trend to continue as the requirement for specialized infrastructure in these type of facilities grow.
The rise of project-based employment will most likely continue to create a demand for flexible housing, a repurposed use for high rise assets. Companies like Aparthotel, Hometel, and Poshtel are bridging the gap between short term retail such that Airbnb offers and traditional apartments and boutique hotels. Their lean operations allow for hybrid lease accommodations at a budget. The Lamington Group has announced plans to launch its Room2lite Hometel brand in light of its growth during the pandemic.
A leader has the responsibility to embrace the change and guide their team through this change, achieving the ultimate goal – improved productivity through technology and increased value-add to the enterprise through data-driven decisions. – Judy Romano
CompTIA’s analysis of federal employment data showed that U.S. companies had approximately 918,000 unfilled IT jobs for a three month period last year.