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Tech affects commercial space: ‘Industrial’ is the new ‘office’ p2

10/18/2013 | Real Estate Blog

Economists are spending their time this week trying to figure out how much the federal shutdown cost the country. Before the shutdown, though, at least one economist was figuring out how the commercial real estate market has changed over the past few years. As we said in our last post, the economist, a speaker at an Urban Land Institute symposium, suggests that it is time to stop blaming the slow recovery, especially in the office market, on the recession.

He believes that technology is the real culprit. Advances in mobile technology have changed the way — and the places — that people work. Employees once crammed into cube farms are now working from home or another casual, remote location. Less office space is needed, and the space that is needed is configured and built out differently: Fewer cube farms and more collaborative space are the hallmarks of these new offices. And all of this means cost savings to businesses and, in many cases, loss of income to commercial landlords.

The employees who have come to rely on mobile technology to do their jobs are also consumers who rely on technology to do their shopping. The retail market is paying the price, with bricks and mortar stores closing by the dozen. This sector may have to reinvent itself and focus on goods and services that just don’t translate into cyberspace. High-end restaurants, luxury clothing stores, discount stores and entertainment venues may eventually comprise the majority of real-world retail space.

On the other hand, the shift to e-commerce could be a boon to the industrial sector. Right now, e-commerce sales account for about 8 percent of all retail sales nationwide. In the next four years, that should grow to 30 percent of all retail sales. To get there, though, retailers will have to improve their e-commerce platforms; if they are offering more goods online, they will need more warehouse space to store them and more industrial space for fulfillment.

The data bears this out. The average bulk warehouse space has increased from 100,000 square feet to at least 300,000 square feet.

If businesses begin to demand more warehouse space and less office space, will industrial and office rents meet in the middle? Only time will tell.

Source:¬†Phoenix Business Journal, “How technology is changing the commercial real estate industry,” Kristena Hansen, Sep 17, 2013