Louie : Yes . I agree with John . I don ’ t foresee much of a decrease in office space because of that trend , as it is more difficult for industrial space users to work from home .
Chin : Even if workers can work from home , many employers will still need them to come into the office for training and all-hands meetings , so they will still need space for these functions . A 20-25 % reduction is reasonable if an office space is flexible .
Gonzalez : I agree with Kevin . Hybrid and remote work and increased efficiencies in office layouts will cause some providers to decrease the amount of space they need for office work . Many offices now function more like check-in hubs . They provide space to meet , print , take meetings , and do other specific functions . Given the rising cost of industrial and logistics space and the value of operational space versus office space , we expect to see some providers downsizing their office space .
CLDA Mag : Talk about warehouse space . What do you expect the trends to be here and why ?
Benko : Companies will continue to value short-term ( 12 – 24-month ) leases that allow for flexibility . We are seeing that it ’ s very advantageous to exercise extensions ( if negotiated ) because the rates are almost always lower than current market rates .
Chin : Labor shortages will increase the need for automation and autonomous delivery systems . That means tomorrow ’ s warehouses will need higher electrical capacity for charging vehicles , robots and drones to support these systems .
Louie : Of the major real estate groups , industrial ( warehouse ) is the most stable . Users will continue to demand space .
Gonzalez : Warehouses grew at an unprecedented pace between 2015 and 2022 due to an increase in ecommerce and related warehouse-occupying industries . Next year , this asset class will remain stagnant and not see a “ drop ” in rental rates as much as other asset classes . We don ’ t expect their year-over-year rental growth to mimic the 10-30 %+ seen in some markets between 2020-2022 .
Competition for space will remain steady , if not strong , given a slowdown in the development of new inventory due to the high cost of debt and construction costs . There is also the potential for adaptive reuse of dry warehouses by manufacturing as investors seek to differentiate their portfolio and make it more attractive to end users . On the other hand , there continues to be a trend of building on spec for simple warehouse use . That could mean valuable opportunities for owners and users could return .
CLDA Mag : What trends have you seen in the last few years that will continue in 2024 ?
Benko : Higher occupancy rates , base rents , rates for common areas , escalation rates , tax rates and insurance costs . We also expect to see continued consolidation in our sector .
48 customized logistics & delivery Magazine I FALL 2023