Last Thursday, I attended a panel discussion on a topic we’ve seen unfold before our eyes: residential demographics shifting the suburban office/commercial real estate market.
For the first time following the recession, the home ownership rate has increased—directly shaping CRE, especially within office and professional spaces. This rise has affected the popularity of the suburbs to many millennials, as they look to gain the most bang for their buck in terms of square footage and school districts to raise children. In turn, more and more employers embrace amenitizing their spaces to appeal to this fresh, young talent. Wherever the next generation of movers and shakers find themselves, this is where companies find desirable to grow their roots.
The city presents difficulty to do business from a tax perspective (specifically Philadelphia). Suburban office space will always come out on top through this lens. With the wide range of transit options available, the burbs have been gaining some steam.
With the health of the market leading to higher commercial office rental rates, corporations are reinventing themselves with innovative, LEED-certified spaces that are in more cost-efficient locations.
It would’ve been strange if Amazon’s HQ2 didn’t come up in the information exchange. One of the questions presented was if Philadelphia is awarded, how would this affect the discussion of suburban office presence? The panel explained that with the transit options available, there is still a tremendous opportunity for the whole area. The tax challenge isn’t too much of a detriment either due to incentives that are probable to Amazon (especially if the location is within the Keystone Opportunity Zone, where ten years of taxation is waived for development in depressed areas) for the selection of Philadelphia or its neighboring suburbs.
A theme in the current market is a goal of nurturing a social environment and “competing against the couch.” With a spike in telecommuting and e-commerce, corporate, retail, and restaurants alike are pushing their experiential attributes. As the suburbs become more marketable, these intentions remain top of mind.
Overall, I’ve attended a few BisNow events that haven’t disappointed – this discussion included. To check out their upcoming talks, check out their future Philadelphia commercial real estate programs here.