In a new report from one of the largest commercial real estate firms in the world, Newmark, Grubb, Knight and Frank, the old model of the isolate suburban office park is already obsolete. Their report revealed that office building tenants now have already different preferences.
According to NGKF, the office park model does "not offer the experience most of today's tenants are seeking." As a result, the suburban office market is faced with "obsolescence" on a "massive scale." More than 1,150 US office properties with over 95 million square feet are confronting this problem. Fortunately, a number of these old school office properties can still be salvaged with renovation.
The report stated, "Walkability and activated environments are at the top of many tenants' list of must-haves." To remain competitive, office parks in isolated pockets without a mix of uses around them must have "in-building amenities" such as a conference center, a fitness gym and food service.
"If tenants are not going to be able to walk to nearby retail or a nearby office property to get lunch, they had better be able to get it at their own building," the NGKF report emphasized.
NGKF studied the suburban office submarkets in and around Denver, Washington, San Francisco, Chicago and New York. Other notable details in the report include a comparison of office buildings in the "southeast suburban" Denver office district. The report showed that office buildings within a quarter-mile of the new light rail line had a lower vacancy rate of 1.7 percent. For outside the quarter-mile, vacancy rates were nine percent higher.
The report supports the study previously made by Jones Lang LaSalle researcher John Sikaitis. Back in 2013, Sikaitis had already predicted this "obsolescence" pointing out that landlords should make necessary changes to avoid being obsolete in the next five years.
