Video Recap of Bisnow's Orange County Office of the Future

Modular Architectural Interiors’ Mark Bassil says that the CRE industry is resistant to new-style office features such as glass walls and open collaborative spaces, even though tenants are seeing increased productivity from them. (With all the glass, there is also a much lower percentage of stones being thrown.) “The tenant has to pony up” in some cases for the improvements that promote higher density and greater productivity, Mark says—and it will be worth it

USAA Real Estate’s Steve Ames says that the company’s recent purchase of a SoCal office building with a lot of open space “has worked better than we expected.” Demand for the space has been strong, with about 35k SF leased. The company put $12/SF into two floors to create it, and it’s been worth it: USAA was able to get higher rates, longer terms and fewer concessions, Steve says. Why? It’s more comfortable space for the tenants.

More employees will be doing even more work at home in the future, and the numbers show that it’s a good (i.e. profitable) idea, H. Hendy Associates’ Heidi Hendy says. “For every employee that’s allowed to work one or two days a week at home, if they’re making $40,000 a year, the organization can net $11,000 to $13,000 more profitability a year,” she says. (People tend to be more productive when they can watch Days of Our Lives while they work.) Employees are more engaged in work at home because they perceive telework as a privilege.

There are concerns about density, especially when it comes to older office properties, Arden’s Paul King says. Going from, say, 250 SF per employee to 150 SF can tax HVAC and power systems, as well as create parking problems. Paul added that Arden has responded to some of these challenges by stacking parking and upgrading cooling towers. For some properties, however, keeping up with the latest space trends makes no sense: “If I spend $75 on a TI, that’s new math to me about how to make a $17 rent pencil,” Paul mused.

Large corporations are eager to consolidate their space, LBA’s Brad Neglia observes. Big floor plates are in and shared services is a huge term in corporate America—one large lunch room, for example, or space for large groups to collaborate. He cited two new tenants consolidating into one of his company's buildings from five or six different sites each.

One of the key changes affecting CRE is the impact of the cloud, Goodman Birtcher’s Brandon Birtcher says, and it’s going to transform the workplace because workers can be anywhere and still get to their files. The future will include the concept of the activity-based workplace, a jump from the open-space office system. Employees will organize by activity, when appropriate, with less emphasis on arbitrary divisions of space (by cubicles, to use one increasingly notorious example).