1. Workspace changes
Based on the Center for Disease Control (CDC) recommendation to maintain a six foot social distance, many companies will be making changes to their office space before reopening. What are some things we are recommending our clients consider?
What is your daily maximum capacity? Rearranging your workspace may not be possible. Once you have determined which desks can be utilized and additional areas, like conference rooms, have been converted into additional desk space or left as is, what is the maximum number of employees that can safely occupy your office space?
What is the cost? Each company will have to decide how much to spend and where. The health and safety of employees is at the forefront. We advise our clients to ask their landlord what protocols have been implemented for their safety and what ongoing initiatives are planned to continually promote health and wellness.
Who’s the authority for oversight and accountability? Once you have reconfigured your office space to ensure your employees are safe, consider appointing a “Pandemic Officer”, ideally with decision-making authority, to answer questions, make sure office space continues to meet CDC guidelines and employees are considering the safety of others.
2. Increase in available subleases
At Wildmor Advisors, we are actively tracking the submarket subleasing fluctuations, as well as vacancy rate changes since March 16, 2020. The amount of available sublease office space on the Atlanta market has increased by 3.8% over the past 60 days. Our clients who are subleasing office space at this time are doing so as a cost recovery strategy. Besides cost savings, what are some other things to consider before deciding to sublease your space?
How much office space do you need? This is the million dollar question most of our clients are seeking an answer to. Many companies have reported employees being more productive and happy working from home. Can those companies realistically plan to part with the extra square footage or even forgo office space all together? Large companies that have announced their employees will be working from home for the foreseeable future, haven’t made any major real estate changes yet. As we see shifts in the commercial real estate market, we will continue to update our clients.
Sublease recovery? Now that we have seen a spike in sublease activity (39 new office space subleases totalling 2,244,879 square feet have been added to the Atlanta market in the past 60 days), our clients need to consider how their space compares with other available subleases and the recovery they can expect. Wildmor specializes in helping our clients strategically analyze the various scenarios associated with subleasing all or a portion of their office space.
3. Rise in demand for Industrial Space
According to Adobe’s Digital Economy Index, e-commerce was up 49% in April, compared to the baseline in early March when the stay at home orders were not fully in place. As e-commerce ramps up, manufacturing and distribution companies are looking to expand their warehouse/industrial operations to keep up with demand. Atlanta has more than 400 million square feet of Industrial space and is the second leading city in the U.S. for this real estate class. What should you consider if you’re looking into acquiring additional industrial space?
Will the amount of available Industrial space on the market decrease? We believe that it likely will. The graph below is the availability rate of industrial spaces in the greater Atlanta area. We did see a brief spike in mid Q1, but are expecting to see the availability of industrial space trend downward in months to come.
How much leverage is there for negotiations? Due to basic economic supply and demand factors, tenant leverage could tighten in negotiations for a more limited supply of available industrial space. Overall, the asking rental rates per square foot for industrial space are expected to continue to increase through Q2 of 2020.
