Written by: Taylor Fanté and Grant Horton
Taylor Fanté, CCIM and Grant Horton are members of the Office Services Group at Colliers | Columbus. They specialize in the leasing and sale of office space in Central Ohio. Owners, investors, and tenants rely on them and their office brokerage team for thorough market knowledge and honest advice to help create solutions for their real estate needs. Their concentration on the office market provides them with extensive knowledge on tenant behavior and current trends.
Office space in 2024 is uniquely positioned to provide great opportunities to tenants searching for it. Landlords are competing for a limited number of deals in the market. This is a time when landlords are creatively finding solutions for prospective tenants to win deals. Landlords also have unique opportunities to sell their buildings as we anticipate interest rates to decline after their peak last year and new properties coming to market in 2024. 2024 is slated to be a great year in the office market!
-Grant Horton
Are most tenants looking in one market or multiple? What is their determining factor in choosing a location?
With office availability at 22% and 1.8M SF of sublease on the market, there are plenty of great opportunities out there and many companies will consider multiple submarkets to find the right space. A location typically needs to be easily accessible to employees and clients, but also in a building or neighborhood that offers desirable amenities. For companies that are looking for the newest and best spaces, exciting developments are being constructed all over the city in areas including Upper Arlington, Dublin, Easton, and Franklinton. In these cases, it’s common to see two properties in two different corners of the city competing for the same tenant, especially when the property is part of a lively and walkable neighborhood with restaurants, bars, shopping, and other amenities that attract employees to the office.
- Taylor Fanté
Have you noticed any trends relating to lease terms or financials such as lease rates or TI?
Construction costs continue to be a challenge, especially considering the large amount of second-generation space available needing improvements. Move-in ready and updated space is increasingly popular with tenants looking to avoid build-out processes that can be long and intensive. When it comes to some of our more challenging vacancies, we have been successful in pre-finishing suites on a speculative basis to win deals. Sometimes a little bit goes a long way and upgrading the lighting, flooring, and paint can transform a suite so that tenants can envision themselves operating out of the space. Landlords are also coming to the table with higher tenant improvement allowances and rent abatements to compete for tenants, which helps bolster occupancy, but also decreases net effective rents.
- Taylor Fanté
New mixed-use developments continue to lead activity in the office sector. What are other landlords doing to compete with these properties?
We’re seeing many owners invest in expanding amenity packages and modernizing lobbies and common areas to remain competitive in today’s market. Some are adding new amenities, including anything from outdoor workspaces enabled with wi-fi to lounge space in the lobby to full-scale amenity floors. For example, 65 E State is undergoing lobby renovations and converting a floorplate into a tenant lounge that will offer a variety of spaces to work and socialize with high-top tables, booths, café and soft seating options, private conference rooms for meetings, a training facility, fitness center, and a golf-simulator.
- Taylor Fanté
What do you predict will be the next big trend in space design for office users?
I anticipate wellness-centric and employee-focused design along with an emphasis on sustainability, collaboration, and inclusivity. As companies whose employees work from home return to physical office space after a period of remote work, it is going to
be imperative that office space is designed with the employee in mind. An increased focus on employee well-being is crucial to creating a productive workspace. Tenants can benefit from a collaborative, inclusive layout, I also believe it will be a ‘key’ to a seamless shift back into in-person, human-to-human work, and a driver of recruiting top-tier talent.
- Grant Horton
Where do you see the working-from-home trend going in 2024 and how will it affect office space, tenants and landlords?
The trend seen over the last few years is that smaller regional companies were able to retain their workforce and remain in the office, while larger corporations allowed for more flexible work-from-home options and have now either re-entered in-person work or are considering coming back to the office. In short, work-from-home is here to stay – but in what capacity? Many companies have adopted a hybrid model, having employees work 1-2 days at home and 3-4 days in the office. Companies that have shifted back into in-person work are seeing the benefits of increased collaboration, increased speed, and efficiencies, as well as identifying and tackling problems as they arise. Although many tenants are returning to the office there is still a large portion that will ride out work-from-home as long as they can.
Landlords will have to be innovative by providing enticing, creative solutions that attract tenants to their buildings and lead to new deals being signed. Tenants must consider what their goals of being in the office are and how a specific building can best position them to achieve those goals. Are they experiencing rapid growth and need lower-cost office space in a high-vacancy building with expansion rights? Or are they an established Fortune 500 looking to obtain Class A office space in a building full of amenities to attract top-tier talent? Identifying what position a company is in and not only showing them suites that work but buildings that align with their goals will be more important than ever.
- Grant Horton
Conversions in office space are trending. How does this affect landlords?
Not every older building is going to be a good candidate for office-to-residential conversions. For the properties that have become obsolete enough and fit the structural characteristics needed to split the floorplates up into smaller units, converting into residential and mixed-use may be the best option if the numbers work. Capitol Square has many office buildings that were built in the 70s and 80s and several interesting adaptive reuse projects are happening right now. For example, the PNC Building is getting a major overhaul from a 24-story office tower into a mixed-use tower that will add 100+ residential units, ground floor retail, restaurants, 170K SF of upgraded office, a public park, and outdoor green spaces. These types of projects improve the health of the office market by removing some of the least functional space from the market and boost the overall economy by adding much-needed housing stock and other amenities downtown.
- Taylor Fanté
For more information on current office trends, check out our 2024 Columbus Office Tenant Report!
Comments