The Owner-Occupier Boom
Richard Barkham, Global Chief Economist and Head of Americas Research, and Darcy Stacom, Chairman and Head of New York City Capital Markets, discuss why occupiers are motivated to own their office space, the hottest amenities to attract and retain talent, the flex-space revolution and how shorter lease terms are playing out in the sector.
Fluid Decision-Making
Large New York occupiers, particularly technology companies, are increasingly buying office space rather than leasing, utilizing their large balance sheets to diversify into real estate. The strategy provides flexibility to quickly adjust floorplates as business lines expand and contract. Occupiers also enjoy the freedom to add amenities that attract and engage talent, such as a roof deck, which risk-averse landlords may shy away from, or need a partner or lender approval to implement.
Desirable Amenities
Major capital improvement projects have emphasized productivity drivers, such as state-of-the-art technology and fresh air. Occupiers can easily justify the investment in improvements and take depreciation write-offs. Meanwhile, access to low-cost capital, either through cash on their balance sheet or the capital markets, creates additional incentive to own instead of lease. Watch for more owners to focus on environmental upgrades with the city’s recent passage of the Climate Mobilization Act, which requires buildings to reduce greenhouse gas emissions.
Brand Building & Flex Space
Owner occupiers are leveraging real estate to build their corporate identity and culture, and implementing agile real estate strategies which allow them to scale quickly, pivot seamlessly and offer best-in-class experiences to their professionals. New flexible workplace providers respond to evolving organizational needs and drive employee engagement. As occupancy trends shift, lease terms are contracting, making financing more challenging for traditional property owners who can’t back up their loans with term. That is another reason occupiers are becoming landlords.
Impact of Dollar Appreciation
A rising U.S. dollar is discouraging some foreign investment in New York, particularly amid recession concerns. Some capital has migrated to markets in states such as Arizona, Oregon and Ohio, where Korean and German institutional investors have sought opportunity. Canadian and European office markets have also benefited from the appreciating U.S. dollar.
Large New York occupiers, particularly technology companies, are increasingly buying office space rather than leasing, utilizing their large balance sheets to diversify into real estate. The strategy provides flexibility to quickly adjust floorplates as business lines expand and contract. Occupiers also enjoy the freedom to add amenities that attract and engage talent, such as a roof deck, which risk-averse landlords may shy away from, or need a partner or lender approval to implement.
Desirable Amenities
Major capital improvement projects have emphasized productivity drivers, such as state-of-the-art technology and fresh air. Occupiers can easily justify the investment in improvements and take depreciation write-offs. Meanwhile, access to low-cost capital, either through cash on their balance sheet or the capital markets, creates additional incentive to own instead of lease. Watch for more owners to focus on environmental upgrades with the city’s recent passage of the Climate Mobilization Act, which requires buildings to reduce greenhouse gas emissions.
Brand Building & Flex Space
Owner occupiers are leveraging real estate to build their corporate identity and culture, and implementing agile real estate strategies which allow them to scale quickly, pivot seamlessly and offer best-in-class experiences to their professionals. New flexible workplace providers respond to evolving organizational needs and drive employee engagement. As occupancy trends shift, lease terms are contracting, making financing more challenging for traditional property owners who can’t back up their loans with term. That is another reason occupiers are becoming landlords.
Impact of Dollar Appreciation
A rising U.S. dollar is discouraging some foreign investment in New York, particularly amid recession concerns. Some capital has migrated to markets in states such as Arizona, Oregon and Ohio, where Korean and German institutional investors have sought opportunity. Canadian and European office markets have also benefited from the appreciating U.S. dollar.
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