Is Remote Work the “Netflix” for office buildings?

Jim Kramer on CNBC Squawk Box recently rhetorically asked: will this mandated “work from home” be the Netfix for office buildings as Netflix was for movie theatres?  I don’t think the analogy fits.  Pre-COVID 19, tenants were laser-focused on collaborative spaces, amenity rich buildings all to foster company culture.  I don’t see how technology can replace the human experience.  Instead, I think we’ll see more of an evolution (versus revolution) of the workspace, including work from home as part of the strategy.

As Bisnow recently reported, CoreNet Global’s April 28, 2020 survey of corporate real estate professionals found that 69% of companies are planning to reduce their office foot print after the recent forced work from home experiment. By contrast, former Google CEO Eric Schmidt on a recent “Face the Nation” interview predicts that office space will be in greater demand due to social distancing and more smaller offices in a “hub and spoke” format.  I question, will the appeal of remote work still be attractive to employees after this pandemic passes and they have a choice?  While the jury is out on the long-term implication of remote work, in this post, I address the Pro’s and Con’s and what policies companies should consider implementing to have an effective work-from-home (“WFH”) strategy.

Limiting the Hidden Costs of Office Rent: Operating Expenses & Taxes

A major component (30% or more) of an office tenant’s rent bill is property taxes & operating expenses (“T&O”) which today is on the rise and where tenants have limited control under landlord-favorable leases.  In Chicago, T&O is rising significantly and where most buildings quote rents on a “net” basis (which may be comparable), the amount of T&O can vary significantly among buildings.  While tenants and their advisors will fight hard on the rent and other deal terms, if T&O is not properly vetted and negotiated, those deal terms will be far outweighed by surprisingly large T&O costs. In this post, I discuss the two common rent structures and offer strategies on limiting increases in T&O to provide tenants with cost certainty. 

How Reliable are Lease Comps?


In office lease negotiations, like most other negotiations, there’s the “sticker price” and the final deal terms. As to the latter, landlords and office brokers frequently talk about comparable lease transactions, a/k/a, “Lease Comps”. Many tenants confuse the reliability of Lease Comps with those of property sales. While Lease Comps have some validity, they need to be taken with a grain of salt.

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