Sleeping Habits of the Rich & Famous

 

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs throughout the Boise Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime locations in the Boise metropolitan area. More information is available at www.sundanceco.com or 208.322.7300.

 

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U.S. Office Demand Expected To Stay Strong Through 2016

With vacancies falling and rents rising in growing numbers of submarkets and slices within the U.S. office sector, demand for office space is expected to remain at post-recession highs for the next two years, according to CoStar Portfolio Strategy analysts recapping the office market’s past year performance.

“2014 was a great year for the office market,” said Walter Page, director of office research, during CoStar’s State of The U.S. Office Market 2014 Review and Forecast. “The keystone mark is that net absorption was up 42% from a year earlier. The fourth quarter in particular was very strong, with over 30 million square feet of net absorption.”

Net absorption of office space rose from 64 million square feet in 2013 to 91 million square feet last year, a 42% increase. Also, the amount of office space absorbed for the year was nearly double the level of new office space added to the market.

Over the next two years, CoStar expects annual absorption to be very similar to 2014, in the 90 million square foot range. The level of construction deliveries should ramp up, as rents have increased across the board and vacancy numbers have continued to tighten, helping make the case for new development.

The strong demand suggests that occupiers have gradually slowed the trend of shrinking square foot-per-employee office footprints, and the shadow supply of empty office space left over from the Great Recession is diminishing as growth moves forward at a very strong clip, added Page, who was joined in the presentation by U.S. Market Research Manager Aaron Jodka and Managing Director Hans Nordby.

The national office vacancy fell 70 basis points from 12% to 11.3% in 2014, the largest decline in office vacancy since the end of the recession.

Vacancies are declining across the board across markets, submarkets and building types and quality levels, with the exception of medical office properties, where vacancies are holding steady at a historically solid 9.6%.

Many markets are now falling below the national vacancy average, with nearly every metro showing year over year declines, with the exception of Washington, D.C., which saw a slight increase, mainly because of strong construction activity.

As demand shifted into high gear during 2014, the percentage of office submarkets with declining vacancies rose to its highest point of the recovery, Jodka said.

“It’s not just a few energy or tech markets or CBDs, this is a feel-good story across the country,” added Nordby.

The vacancy recovery has been particularly strong among newer properties seeing the highest demand by tenants, said Jodka. While buildings 2008 and newer have seen vacancies plunge from a high of 45% in 2008 to nearly 10% in the fourth quarter of 2014, older generation space from the 1980s, much of it located in less desirable outer-ring suburban submarkets, hasn’t recovered at all.

“That’s not where tenants want to be,” Nordby said. “Oftentimes, they want to be in the CBD or the very closest-in suburban submarkets.”

Markets where demand for new properties is especially strong include Minneapolis, Orange County, CA; Nashville, Dallas/Fort Worth and the East Bay area of San Francisco. New product is logging higher vacancy rates in markets where demand still isn’t quite matching the rate of new construction or are still dealing with an overhang from the last cycle, such as Miami, San Jose, Los Angeles, Washington D.C. and Portland.

Building upon that flight-to-quality thesis is the rising demand for newer 4 and 5 Star space, which is seeing double the rate of absorption of less quality space, Page said. Demand for high-quality space grew 2% from 2013 to 2014, versus 0.9% for 1, 2 and 3-star space.

“Another interesting thing is that at this point in the market cycle is that this flight to quality continues to grow,” Page said. “At this point in the previous cycle, it was not as strong. As tenant footprints shrink, it’s a lot easier to tell them, we’re going to put you in nice space rather than not-nice space.”

Another emerging trend is after seeing most of the action in suburban markets over the last few quarters, activity in CBDs is starting to pick up significant demand and grabbing its fair share of the market, Page said.

Overall demand strength has given owners the confidence to raise rental rates. Rent growth, which closed 2013 up 3.3% year over year, performed even better last year, logging 3.7% growth, nearly double the rate of inflation.

Construction continues to stay in check in most metros. Deliveries of new space rose 9% from 43 million square feet in 2013 to 47 million sf in 2014, very balanced at around half the rate of net absorption. The under-construction pipeline of 81 million square feet a year ago increased a whopping 32% in 2014 to 107 million square feet, 18 million square feet of the activity in Houston.

The story originally appeared on the CoStar website.

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs throughout the Boise Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime locations in the Boise metropolitan area. More information is available at www.sundanceco.com or 208.322.7300.

 

 

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Office Temperature Wars

 

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs throughout the Boise Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime locations in the Boise metropolitan area. More information is available at www.sundanceco.com or 208.322.7300.

 

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Digital Revolution Continues To Transform The Way We Work

The full extent of the way digital technology is transforming British working life is apparent in new research published by Brunel University. The study – essentially a snapshot of the digital revolution in 2015 – found that 98 percent of the 830 businesses surveyed have a website, 8 in 10 manage finances online, 53 percent provide flexible working and 63 percent see innovation as a way to improve customer satisfaction. However, the study also reveals a major gulf between big business and SMEs, with larger firms significantly more digitized than their smaller contemporaries. This raises concerns over the preparedness of the SME sector at a time when the Government’s growth agenda has prioritized nurturing and supporting new and evolving enterprises – and for whom the digital battleground has broken down traditional barriers to entry.

For the first time the study has created a scoring system for measuring the digitization of British business. It also reveals wide-ranging regional variations in the digitization of business, with the East Midlands and South West emerging as the most digitized regions of the UK – ahead of businesses in London.

The Applegate-Brunel Digitization Index (ABDI) is a new measure against which companies can benchmark their digital maturity as a business, and by which policy makers can assess the health of businesses and sectors against a consistent measure. This survey covers four main areas of business operations – buying, selling, innovation and management. The study also provides a national gauge to assess the take-up and use of digital technologies by businesses across UK regions and industry sectors. This index will be published annually, to track both overall movement and also changes in different regions and types of business.

Key findings of the index include:

  • 98 percent have a company website
  • 88 percent make extensive use of online banking
  • 64 percent find more than half of their suppliers online
  • 63 percent expect digitization to further improve customer satisfaction
  • 53 percent provide remote access to staff
  • 52 percent research customer requirements online
  • 46 percent have an intranet
  • 45 percent make more than half of their purchases online
  • 44 percent spend more than half of their marketing budget online
  • 41 percent have adapted their websites for tablets and smartphones

Stuart Brocklehurst, CEO at Applegate Marketplace commented: “In just 25 years the world wide web has transformed British business. Life without a website today is simply unimaginable and businesses big and small are embracing the ability to research, to source, to pay and to manage through digital technologies. Engagement is universal, although our research does suggest many businesses can do still more to reap the benefits of digital technology fully. For example, whilst they research avidly online, only one in five businesses sell their products online. Also, more needs to be done to help the SME sector digitize at the same pace as big business to help them compete on an equal footing on the UK and internationally. The creation of this index to measure digitization will help provide a benchmark for the business community to ensure it is making the most of technology in order to invest in business growth for the future.”

Professor Zahir Irani, Dean of Business, Arts and Social Sciences at Brunel University London, said: “This new index provides businesses with a means to better understand themselves, through assessing what competitive advantage they have or to help prioritize those gaps they need to close to enhance their own performance. We see companies being able to make strategic decisions about where and how they invest based on information taken from this survey. Policy makers have a real opportunity to use the data to direct Government funding to inform regional, cities and town digital agendas.”

The story originally appeared on the Insight website.

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs throughout the Boise Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime locations in the Boise metropolitan area. More information is available at www.sundanceco.com or 208.322.7300.

 

 

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The Impending Opportunity in Real Estate Technology

Things are starting to simmer in real estate technology. The first phase of technology development in the category, which was primarily focused around listing services for the residential side of the market, has paved the way for industry leaders to broadly reconsider how technology can make their lives better.

For those of us in the technology world with some background in real estate, the opportunity may seem obvious. But real estate is a sector of the economy that’s created immense wealth without changing their workflows or processes for many decades, so there’s a predisposed lack of urgency to upgrade the ol’ tool belt.

Market Primer

The word “trillions” gets thrown around a lot when people refer to real estate as an asset class. Broadly speaking, real estate is the largest asset class in the U.S. worth an estimated $40 trillion according to this December 2014 report from the Federal Reserve.

To get specific, residential housing is the single largest “tangible” U.S. real estate asset, worth roughly $23 trillion, and commercial real estate accounts for another $15 trillion. To put this in perspective, as an asset class, real estate is meaningfully larger than other U.S. heavyweight industries like fixed income, equity and health care.

Real estate lending is by far the largest lending category, belittling credit card debt by orders of magnitude. Residential mortgages alone accounted for nearly $12 trillion as of December 2014 compared with $882 billion in credit card debt. $1.6 trillion in new real estate debt is issued each year — $1.1 trillion in residential and $500 billion in commercial. According to this report by Jones Lang LaSalle, annual commercial real estate lending is projected to reach $1 trillion by 2030.

The National Association of Realtors is the largest industry trade association in existence with 1.25 million members and there are approximately 3 million active real estate agents in the U.S. There are roughly 500,000 construction professionals and more than 120 million actively managed commercial properties. In summary, there’s a whole lot of money changing hands in the sector.

Venture funding of real estate technology startups reached a peak in the fourth quarter of 2014, with 32 companies raising nearly $300 million. In total, venture funds invested $605 million in real estate tech in 2014 versus $241 million the year before – more than 2.5x growth. There are a number of signs suggesting the trend will continue through 2015, as the category moves from niche status to one that gains widespread attention.

I believe the next phase of growth — and most exciting opportunities — will be fueled by products and services that serve the commercial side of the real estate market.

Residential Versus Commercial

The first technology innovators to focus on real estate primarily addressed the residential market. Companies like Zillow, Trulia, Realtor.com, RedFin and StreetEasy showcased the power that technology can have when applied to a market as large and lucrative as residential real estate. Each of these companies operate, generally speaking, as residential listing services, and this has proven to be the low-hanging fruit of the real estate vertical.

Commercial real estate encompasses office buildings, hotels, malls, retail stores, multifamily housing, industrial property, warehouses, medical centers and garages. Thus far, technology innovation on the commercial side of the market has been limited, with two outliers being CoStar and LoopNet.

This is partially the result of data that is tedious to gather and “dirty” – making it challenging to use, industry information that is opaque with incumbents who have incentive to keep it that way, and some of the early momentum that gathered in the mid 2000s being stymied by the financial crisis and subsequent pullback that commercial development and investment experienced.

With the economic recovery in full swing and money flowing back into commercial development, some of these roadblocks have been lifted and the market is, once again, ready for new entrants to build upon the work of the early pioneers in commercial real estate technology.

Products and services that address the commercial side of the market are more exciting (versus residential) and represent a massive opportunity for a few key reasons:

Higher transaction values mean there’s more at stake for the players involved.

Given higher transaction values, the competition is stronger and so the players are willing to pay up for competitive advantage.

Single transactions often involve multiple constituents — property brokers, mortgage brokers, lenders, developers, appraisers, builders — each of whom want an edge.

There’s lots of relevant commercial data available to parse, which naturally plays into the wheelhouse of skilled data scientists and tech entrepreneurs.

Broader diversity of funding sources creates newfound opportunity for pricing and product optimization.

The market is antiquated and grossly underdeveloped.

NYC: Epicenter of Commercial Real Estate (and Real Estate Tech)

Much the same way that the Bay Area has historically claimed the highest concentration of technology startup development, New York City is the epicenter of commercial real estate.

According to Cushman and Wakefield, New York City has been the world’s largest commercial real estate market every year since 2010. In 2014, New York City captured 7 percent of global investment with $55 billion. It’s only logical that the most important technology businesses serving commercial real estate will be built and headquartered in the commercial real estate capital of the world.

We’ve already started to see this play out with more than half of the 2014 sector funding happening in New York City. Companies like VTS, Reonomy, Hightower, FieldLens, Honest Buildings, The Square Foot, Onboard Informatics, Nestio and Urban Compass – all based in New York City – are already well on their way to becoming important businesses.

Global Scale

The market of potential customers for applications and services serving the real estate market is global, with half the world’s top 12 largest commercial real estate markets outside the U.S. London, Tokyo and Paris are among the top six. Toronto, a city that doesn’t appear on most global rankings based on transaction volume, has more industrial cranes installed right now than anywhere else in North America.

India and China have been among the most active markets outside the U.S. for real estate technology investment. International startups like Housing.com, PropTiger, Fangdd, Anjuke, CommonFloor and HouseTrip have all raised substantial sums of capital already.

Biggest Areas of Opportunity

Opportunities for innovation using technology abound across the real estate industry. Some of the biggest near-term opportunities for innovation are:

Property Management: Several companies are already competing for dominance in this category, most offering software that helps property owners and management companies oversee and easily track commercial real estate assets. Industry-wide adoption is still sub-10 percent, though, so lots of opportunity for growth remains.

Research and Analytics: Traditionally, commercial real estate developers would hunker down with teams of analysts using HP calculators and gathering demographic research to evaluate an investment opportunity. Today, open data initiatives in municipalities across the country — combined with creative needle threading by software developers — is changing this landscape, and much of the data is readily available via monthly SaaS licenses.

Listing Services/Tech-Enabled Brokerages: Contrary to the incumbents in the residential market, which are predominantly media businesses generating revenue from advertising, a real opportunity exists for tech-enabled commercial listing services that could level the playing field, acting as marketplaces, and replacing the less efficient relationship-driven model that still persists today.

Mobile Applications: By their very nature, real estate professionals are on the go, pound-the-pavement types. Brokers, landlords, appraisers and developers are constantly running around visiting properties. One can assume that many of the most successful applications serving this market will have a healthy and robust mobile component.

Residential and Commercial Lending: Regulatory changes have opened up opportunities for innovation in lending, and real estate lending is by far the largest sub-category. We’re starting to see a number of emerging companies target this area in different ways. Residential and commercial lending are different animals so my guess is that we’ll see a dozen worthwhile challengers going after each market.

The real estate industry is vast and we’ve only just begun to scratch the surface when it comes to opportunity for technology-enabled innovation. Given the dollars at risk and the proportion of the broader economy that real estate represents, there is every reason to believe the category will produce multiple ‘unicorns’ worth billions in enterprise value. The past two years have been the most exciting yet for real estate tech and I can’t wait to see what the next few will bring.

The story originally appeared on the TechCrunch website.

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs throughout the Boise Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime locations in the Boise metropolitan area. More information is available at www.sundanceco.com or 208.322.7300.

 

 

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St. Patrick’s Day By The Numbers

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs throughout the Boise Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime locations in the Boise metropolitan area. More information is available at www.sundanceco.com or 208.322.7300.

 

 

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Would A Shorter Work Week Make Employees Happier?

If your boss asked you out of the blue whether you’d like to work about five fewer hours a week for the same pay, your response would no doubt be something along the lines of yes, please!, give or take a few exclamation points. The new arrangement would seem to provide more time for family or hobby, and perhaps even make work itself more tolerable. On the whole, you’d probably expect to go home a happier person.

South Korea made employees just such an offer back in 2004 by enacting a national policy that reduced the work week by 10% (from 44 to 40 hours) and made Saturday an official off-day. But the plan may not have led to the quality-of-life improvements that policy leaders expected. On the contrary, labor scholar Robert Rudolf of Korea University reports in the Journal of Happiness Studies that the policy had no effect at all on job or life well-being.
“In particular,” concludes Rudolf, “holding everything else including own earnings and household income constant, average reductions of more than four hours of work time did not have a significant impact on full-time workers’ overall job and life satisfaction.”

So a shorter work week didn’t make people happier at home or in the office. Huh. Also: huh?

Before we get to that question, let’s take a closer look at Rudolf’s research. He analyzed longitudinal data on well-being from a pool of roughly 13,700 workers between 1998 and 2008. That time period covered several years before and after the new work hours went into effect, offering a pretty strong window into the policy’s impact on well-being. He also restricted the sample to workers who were married or living with a partner and a family, since one of the main points of the plan was to improve home-work balance.

One of the clearest things Rudolf found in the data is that Koreans work a lot. Other reports had already shown as much; in 2012, according to global data, Koreans worked the second-most annual hours in the world. Rudolf found that despite the 2004 policy establishing 40-hour work weeks, Koreans still worked 51 hours a week, on average, in 2008. That figure was down from a decade earlier, however, as Koreans had averaged 56 hours a week in 1998.

For the most part, to no one’s surprise, workers preferred shorter work hours. But very long work weeks didn’t bother everyone. Self-employment was associated with higher job satisfaction even if it led to more and less predictable hours, perhaps because people who work for themselves enjoy what they do. Very long work hours—more than 60 a week—also showed no effect on life satisfaction for some workers, perhaps because these people had achieved a high status.

Even more interesting, though, was Rudolf’s discovery that the new shorter work-week policy had no direct significant effect on a person’s life or work satisfaction. The finding held true controlling for income; it was true for men and women alike; and it was true whether work weeks fell by four or eight hours. Simply put, the results suggest that telling people to work less doesn’t necessarily make them happier (though it remains possible that some people intentionally choose less-demanding jobs to avoid the stress of work and thus improve their well-being).

“These findings are probably not what policy makers had intended when designing the reform,” Rudolf writes.

That’s for sure. The biggest question is just why the policy went so far astray. The most likely explanation, in Rudolf’s mind, is that companies changed their work environments to counterbalance the new policy. Supervisors might have asked employees to accomplish the same amount of work in less time, or maybe companies reduced paid leave. In that sense, whatever workers gained in terms of free time out of the office, they might have lost in terms of new stress in it.

So the evidence suggests that a slightly shorter work week alone makes not a happy worker. That doesn’t mean a plan like Korea’s has no value. Productivity and work quality, which have been shown to fall when employees work very long hours, might have gone up (then again, stressed-out workers aren’t necessarily good workers). It does mean that designing a plan to truly improve work-life balance may in itself be much harder work than we might have preferred.

The story was originally published on Fast Company.

About The Sundance Company
Established in 1976, The Sundance Company has the experience to help you with your commercial real estate needs throughout the Boise Valley. If your requirements include property management, leasing, real estate development, project planning, construction or space planning then look to us. The Sundance Company has more than 1.5 million square feet of office and industrial space available in prime locations in the Boise metropolitan area. More information is available at www.sundanceco.com or 208.322.7300.

 

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