This past week, the Atlanta Business Chronicle posted an article lauding the fact that a long time member of Atlanta’s office skyline, Colony Square, had signed a lease with a WeWork, a large national co-worker operation, for 3 floors in their 100 Building and that that operation would ultimately “bring almost 1,000 workers to the mixed use project.”
Being a slave to logic, I immediately thought back at the numerous opportunities that I had had over the last 45 years to visit this project and how difficult it had been typically to procure a parking space. Like most urban projects, Colony Square’s parking was built to accommodate a “float”, that being an average number of occupants at the buildings at a given time, rather than the actual number of desks located on the floors. In this case, the parking was designed to accommodate 2 spaces per 1,000 square feet where the actual occupancy was probably closer to 4 spaces per 1,000 square feet. Imagine my surprise to find that Colony Square was leasing space to a tenant whose population was 18.8 persons per 1,000 square feet.
Of course, WeWork does not expect 1,000 people to actually occupy those three floors at a single time. This is rather the number of people that, using their own “float”, they feel that they can accommodate on those three floors without forcing folks to sit in each other’s laps. With co-worker environments, people share chairs, desks, offices, conference rooms …. space. Some are virtual workers who never venture upon the premises. Some of the more traditional, executive office suite companies estimate that their effective occupancy is 1 person per 100 square feet. Still is this much less than the 18.8 per 1,000 (1 per 53 square feet) projected by WeWork at Colony Square.
CONDECO produces a sensor program (watch this video) that monitors that use of desks or workstations and even conference rooms to determine whether a company is getting its money’s worth out of its office facilities. This is the type of thing that should keep office building owners and lenders awake at night. This is one very big reason that, with very limited exceptions, there are no spec buildings going up in the Atlanta office market right now.
Does anyone fully understand the long term implications of this super-utilization of office space? No. But, if you are going to a meeting at Colony Square, better take the bus.
. Personal computers and sophisticated phone systems have almost eliminated clerical workers
. Not needing traditional office space and often working from their homes, employees locate in cities preferred for lifestyle reasons
. Transportation becomes less important with a preference to travel shorter distances for one’s sustenance
. Because travel is often limited to flying out to another city, commuter traffic issues can be minimized; the need for the expansion of highways is questionable
. Hotel use is up because of the number of workers use these occasionally to visit a central office or to attend meetings with their colleagues or clients
. Online shopping has led to an increased need for 3rd party logistics and fulfillment centers that, in order to reduce travel distances and the cost of shipping, or more likely to be located closer to the consumer
. Curb side pickups have affected traditional retail and grocery stores that are increasingly smaller and more likely to accommodate customers who stop by to pick up packages that are ordered online
There remain a large number of traditional office operations that are not set up to align themselves with this new paradigm, but the number of these is more likely than not to decrease over time. Organizations are rethinking their entire structure in order to attract the highly qualified professionals that refuse to commute long distances to accommodate tradition work environments.
37signals founders Jason Fried and David Heinemeier Hansson recently co-authored the book, Remote: Office Not Required. It is a detailed account of how their organization, consisting over 300 workers worldwide operates with a minimum requirement for office space. It addresses communications, online meetings, recruiting and hiring and the establishment of corporate culture.
I encourage every business owner to get a copy and reflect on its potential as relates to his business operations.
These headlines appeared in this morning’s Atlanta Business Chronicle.
Of course, you have to be living on another planet to ignore the loft office boom in Atlanta. It’s the “in thing”.
David Haddow, one of the best real estate consulting minds in Atlanta, recently noted in his quarterly newsletter, “Office development has been slow to bounce back following the 2007 – 2009 recession. The loft office component of Ponce City Market (550,000 square feet) is the only significant delivery in the past six years. It was very well-received, experiencing strong demand from technology and other creative companies attracted to the building’s industrial feel, Beltline location, and mixture of uses.
“Developers of a new wave of loft office projects are betting that the success of Ponce City Market was not an anomaly but indicative of a broader shift in workplace preferences. As of August 2016, five loft office developments, totaling 525,000 square feet, were underway in Atlanta (see chart). Loft office space is not a new trend in Atlanta, but it was once an affordable alternative to Class A buildings. However, rents in this new generation of projects are generally competitive with traditional office towers and range from $26 to $34 per square foot.”
He goes on to add, “The flurry of loft office development raises the question of how deep the demand is for this product. It is too early to tell, but strong job growth in the technology sector and the leasing momentum at Stockyards Atlanta and Armour Yards are encouraging signs.”
But today’s article in The Atlanta Business Chronicle tells us that the new, lead tenant for this hip and cool loft office development in the Old Fourth Ward is none other than Room to Work LLC. If you read on you will note that Room to Work LLC is a “co-working concept”. Like loft office space, co-working concepts are springing up all over the place. They are to the traditional office model what Uber is to the taxi and limousine business. The article refers to three of these, WeWork, Industrious and Regus’ Spaces while ignoring the number of “mom and pop” operations set up by local landlords trying to fill empty space in their buildings that no one wants to lease.
The bottomline is that co-working concepts are synthetic office use and will not support a convincing enough cashflow to have anyone other than private equity firms committing long term resources to these things. Unfortunately, given the poor returns in other traditional investments and the hoopla given these new hip real estate investment opportunities, there are way too many, too eager investors rushing into this type of thing.
Caveat Emptor – “Let the buyer beware”!
“Make it your ambition to lead a quiet life: … mind your own business and work with your hands …, so that your daily life may win the respect of outsiders and so that you will not be dependent on anybody.”
am·bi·tion amˈbiSH(ə)n/ noun – a strong desire to do or to achieve something, typically requiring determination and hard work.
What do we want from life? Peace and quiet? Do we have to wait until retirement or death to enjoy this?
Have you ever noticed how, when you are watching a show on network television that the advertisements for the programs are broadcast at a higher volume. We often have to turn down the volume just to stay in the room.
Noise attracts attention. Noise motivates. A siren can be good if it alerts others to an approaching ambulance or police car. However, noise is also used to intimidate. And, this is not always in our best interest. Those that would control us, yell. Drill sergeants yell!
The world is a loud and scary place.
Respect? Wouldn’t we live better lives if we enjoyed the respect of others? Would the respect of others cause us to have more self-respect?
If we are not dependent on others, we are independent, right? Is that truly achievable?
Yet, we are told not to be dependent on anyone. This is to be our ambition. We are to avoid anything, anybody that requires dependency in exchange for protection. Dependency will not bring us peace. Nor will it bring us respect.
I do not mean to be insensitive to complex situations. We have to pay our bills, take care of our responsibilities. Possibly, we need that job because we need the experience that we will learn by doing it. This is fine. However, if we lack the skills to do anything else and, as a result, are dependent on that job because of our limitations, we must develop others skills that will allow us to escape the entrapment of dependency.
If you are dependent on your boss’s generosity for your survival, do not be surprised if you are treated like a dependent and compensating accordingly. What if something should happen to where he is no longer there to support you? You’re in trouble … whose fault is that, really?
Worst case, your boss or spouse may use your dependency to abuse you, to demean you, to take advantage of you, to ignore the relative value of your role and that of your coworkers by unjust compensation or arrogant despotism, and you put up with this. You lack the “ambition” for the one thing that is critical to your being – independence – not being dependent on others. Ambition requires “determination and hard work”. You must flee that trap. Better to live a modest life on modest means than to be a slave to an unjust employer.
Seek professional help. Follow your gifts. This is where you are most likely to find success and job satisfaction. Independence.