This article by Whitney Strotz can be seen in it's entirety at North Bay Business Journal HERE
While other shifts may continue to emerge, we offer seven market lessons we expect to have far-reaching impacts on our market for years to come.
1. COVID-19’s impact on property was highly uneven. While most office buildings were not used as much last year, many landlords still received most of their rent and have been holding firm on rates. Properties that were vacant going into the pandemic are likely still vacant. Properties that were outdated before, feel even more outdated now. The variety of experiences creates a much more diverse marketplace than we have had over the last few years.
2. The pandemic accelerated already-emerging trends. Marin has seen companies moving to the suburbs or looking to create hub-and-spoke configurations over the last several years, and we are seeing even more of that now. Marin office space with its easy parking, walk-up buildings, productive outdoor work areas, and buildings with operable windows has been a compelling option. Many of the new leases completed in 2020 were from companies new to the market, many moving north from San Francisco.
3. The future of office in Marin looks bumpy, but with potential. Expert consensus is that long-term office-using-job growth and movement to the suburbs will combine to build back demand. Central-southern Marin’s sublease rate of 11.7% remains well below that of neighboring San Francisco’s, at 51.8%, one of the highest in the country. This likely suggests a quicker bounce back for the market as restrictions are lifted and likely strength for Marin versus San Francisco.
4. Hybrid model is optimal model for most users. Most companies are not moving to a 100% remote model. Although there is no universal answer on the optimal balance of remote versus the office, most surveys show that the majority of employees expect to spend two to four days in the office post-COVID. Their employers expect the same. Many employees spent time in different work environments, like coffee shops, client sites, home or secondary offices pre-COVID, and we anticipate that will expand in the future.
5. Shifting purpose means changing space. With Marin County’s strong entrepreneurial and service industries, collaborating and being in-person will likely remain an important aspect. As the emphasis of the office will be on collaboration, socializing, innovation and creating culture — activities that are difficult to support through remote work —office space will change to reflect this shift. Many organizations will find that their old spaces will need to be reworked or changed to accommodate their needs going forward. We are seeing landlords take an active approach and creating speculative suites that are ready-to-occupy, with updated configurations and finishes.
6. The average price per square foot increased in 2020. Unlike the Great Financial Crisis of 2007–2009, when values dropped and remained low for a couple of years, in this cycle, pricing has held firm. Despite a significant decline in sale volume, properties that transacted did so with little to no discount. Very low interest rates and strong government-backed Small Business Administration programs have helped maintain pricing, particularly for smaller properties.
7. Finding the right balance. It’s not just about giving employees flexibility over when, where and how to work. Rather, it takes active planning to balance preferences with company goals and costs. It’s no longer just about rows of desks. It’s about space as an enabler and determining the optimal configuration for an organization. Building and sustaining culture in a hybrid model and shifting to a greater emphasis on flexibility will be important. The focus will be on understanding how space enables an organization’s employees to do their best work and a company to achieve its financial goals.
It cannot be overstated the importance of choosing a real estate agent who understands your needs, can offer sound advice, and take you through your transaction with patience, grace and wisdom. I’d love to hear from you. Tracy Curtis, Coldwell Banker Realty, 415-910-0599.
#tracycurtis #marinrealestate #coldwellbankerrealty #home #marincounty
Whitney Strotz is an executive managing director and North Bay market leader in the Larkspur office of Cushman & Wakefield.