Commercial Investment Real Estate Spring 2020 | Page 10

COWORKING INSTABILITY
TEMPERS OFFICE
LEASING ACTIVITY VOLUME UP, PRICES DOWN
IN LAND DEALS
FOR 2020 RESTAURANTS STREAMLINE
FOOTPRINTS FOR
DELIVERY-ONLY SERVICE EAT, SLEEP, PLAY AT
VIDEO-GAME HOTEL
Considering the headine-
grabbing troubles of WeWork
in late 2019, leasing activi-
ty in office spaces were ex-
pected to see consequences.
According to a JLL’s office
outlook for 2020, cowork-
ing dropped from a primary
driver of tenant demand to
an afterthought in 4Q2019.
The tech sector leased the
largest amount of office space
by far, accounting for 23.58
msf compared to runner-up
finance/insurance’s 15.93 msf.
Deliveries will continue
to roll in through 2020 and
2021, which could boost va-
cancy in highly competitive
markets like Silicon Valley;
Austin, Texas; and Charlotte,
N.C. More mature markets
like Chicago, New York, and
Washington, D.C., could face
diminished absorption com-
pared to additions in supply.
But tight markets such as San
Francisco (5.6 percent vacan-
cy), New York (7.3 percent)
and Grand Rapids, Mich.,
(8.7 percent) seem primed for
additional supply. The good news: The size
and volume of land sales in-
creased from October 2018
to September 2019 by 2.2
percent and 2.1 percent, re-
spectively, according to the
2019 Land Market Survey by
the National Association of
REALTORS®. The not quite
as positive news: The 826 re-
spondents expected volume to
increase another 2.2 percent
in the next year, but price
growth to drop to 1.6 percent.
Other key factors include:
• Due to reduced sales of
timber, recreation, and
land sales, the median land
sale decreased in size by
47 acres.
• The median price per acre
of land in transactions
jumped $1,000 to $5,500,
due primarily to a boost in
residential sales.
• CCIMs represented 9.5
percent of respondents this
year, compared to 7.4 per-
cent the previous survey. Off-premise dining has been
on the upswing for years,
with third-party delivery op-
tions and app-based ordering
services making it easier to
ditch the restaurant for the
couch. The latest trend ditch-
es dine-in and takeout options
altogether. These so-called
ghost kitchens operate entire-
ly for delivery services. Such
operations allow restaurant
chains to reduce real estate
overhead and employment
while reaching new customers
with new products.
According to the Na-
tional Restaurant Associa-
tion’s 2019 survey, compared
to the previous year, 39 per-
cent of consumers are using
drive-thru more often, 34 per-
cent are using delivery more
often, and 29 percent are
more likely to order takeout.
In response, major chains, like
Red Lobster and Chick-fil-A,
and smaller operations, like
high-end sushi in New York,
are exploring ghost kitchens. If you had any question that
gaming has gone mainstream,
Atari announced plans to
build video game-themed ho-
tels across the United States,
with the goal of breaking
ground on an initial location
in Phoenix later this year. Ac-
cording to a Jan. 27 release,
Atari Hotels plans to include
immersive entertainment and
virtual reality experiences for
various demographics and
gaming abilities.
The locations will also
feature venues and studios
to accommodate esports, a
growing industry with an esti-
mated 1.57 billion participants
worldwide spending $152.1
billion on games, representing
an annual increase of 9.6 per-
cent. Atari is partnering with
True North Studio, a Phoe-
nix-based real estate develop-
er, and GSD Group, an inno-
vation and strategy group.
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE
SPRING 2020
MARKET TRENDS