August 14, 2020
While areas of the country and certain sectors of business have come to a halt, there are some who are moving forward and setting up expanded office space while they ride out the pandemic.
Regional markets and industries vary, but there’s a strong rise in e-commerce businesses and a surprising continuation in construction projects for major office and mixed-use buildings.
Here’s a quick look at who’s making moves right now.
Chicago has a spotlight on their growth through the pandemic as major building projects get underway for new skyscrapers around the city.
Sterling Bay announced in July plans for a 47-story mixed-use tower to include 289 residential units, 25K SF of retail space and a 280-key hotel that citizenM agreed to purchase upon completion.
Similarly, construction began recently on a new Salesforce Tower. The 813-foot, 1.2M SF tower, where Salesforce agreed to lease 500K SF, is rising at Wolf Point along the Chicago River.
Commercial and multifamily projects in Chicago have only seen a 9% decline from the same period last year, according to Dodge Data & Analytics. This was a much smaller decline than others suffered by the nation’s other top markets. The New York area saw a 24% decline, Washington, D.C. saw a 42% decline, and Los Angeles metro areas saw an 18% decline in activity. In Atlanta office leasing activity during the second quarter was down 50% from the same period a year ago.
Although we’re seeing a significant drop in commercial leasing in the Atlanta market, there are major projects underway that have remained relatively unaffected by the pandemic.
On the whole, office developers in Atlanta are in a better position to weather the downturn than they were in 2008 according to one Atlanta-based commercial real estate consultancy. 62% of office construction projects slated to open this year are already leased, according to Transwestern. And big deals like Microsoft’s office at Atlantic Yards in Midtown and Rooms2Go’s corporate office relocation to Brookhaven are still moving forward.
CEO of North Wells Capital, Jim Fox commented on why these projects have continued despite the pandemic. “It’s like turning around a battleship,” Fox said. “If you’ve got commitments to tenants, if your financing is in place and you’ve organized your capital and your design and entitlements are complete, it means the project has been in the works for years and you’ve spent an extraordinary amount of money.”
Earning back investments in these buildings can take two years or more depending on the success of leasing the space out to tenants. So for now, it seems the impetus is placed on staying on track and having readily available space as the economy bounces back over the next several years.
And while financials are at the forefront of many investors minds, so is remaining competitive to recruit talent and create spaces for collaboration. Rooms2Go CEO Jeff Seaman said, “We believe that our new office environment will help us recruit additional talented associates as we grow our Atlanta headquarters significantly over the next several years.”
Not surprisingly we’re also seeing the expansion of industrial space around the country. E-commerce businesses have continued to gain traction and thus, are continuing to expand their warehousing space. They’re also moving forward with standard five to seven year lease terms.
Amazon has leased new warehousing facilities in Chicago at a rapid rate. According to Colliers International, “the e-commerce giant committed to an astounding 11M SF in 10 buildings. Amazon.com inked 7.2M SF in new leases during the period, accounting for 51% of the total new leasing volume recorded in the quarter.”
While the pandemic continues to swell around the country there’s a vested interest in continuing to build and grow businesses in a traditional office environment. Time will tell what permanent changes will be made to the office, but for now, we’re seeing progress and a focus on the future.