By Ben Crosby
As the worst of the COVID-19 pandemic in the United States seems to be behind us now, and companies are starting to bring their people back into the office, maybe not full time, but at least some of the time, interest in office property is picking up again. In fact, only about a quarter of the workforce is expected to continue working fulltime from home.
While buyers might understandably be on the prowl for great opportunities, it would be ill-advised of them to jettison the caution they would apply at other times and in other markets. What follows are 11 things buyers do well to consider when investing in office property:
- Size of the site: What size does the property need to be? The answer to this question is a function of two variables: the actual size needed at the moment of purchase and the maximum size the site will reasonably have to have in the foreseeable future. The square footage of the land that will be required for a new build will always also have to accommodate for parking and very often local land development codes will dictate to owners how much parking space they need to provide for. If the sum of the needed office space and the desired and required parking space does not fit the size (and the shape!) of the land under consideration, you have a problem.
- Size image: To which degree will the office building have to advertise the company to passers-by? Some buyers deliberately choose locations that are in busy locations because they know their new office building with the logo will be seen by many (tens of) thousands of people each day. If this is important to you, then you will have to find a location that accommodates for this.
- Parking: For existing buildings, available parking is an important factor to take into account. For offices that still need to be built, parking space needs to be budgeted for.
- Expansion plans: As previously mentioned, there needs to be room in an office building to carry future growth, and in some scenarios, a business that is growing at a fast clip might already allow for the space needed for a future second building.
- Floor area ratio: This variable pertains to the efficient use of space. You can have a 50,000-square-foot building which on paper provides for sufficient room, but if that building has big lobbies that take up more than one story and wide stairways, you will end up with a building of which only 60 to 70 percent can be used by yourself or rented out.
- Amenities: Where will the staff have lunch? Nobody likes it when driving to and from a restaurant ends up eating 50 percent of their lunch time. Besides restaurants, other amenities, such as hair salons and dry cleaners, are also popular with employees.
- Workforce: If you are planning to hire staff locally, then it is important to buy office property in an area that has a demographic composition (level of education, age, etc.) that fits with the profile of the staff you will be looking to hire.
- Housing: Is there (affordable!) housing available for your (future) employees at a reasonable distance from where you want to have your offices? What “reasonable” means has changed over the years with younger generations being less willing to commute long distances than their parent’s generation was.
- Permitting: If a new office building is to be constructed, then your own project deadline will decide on whether you will need to find land that is already permitted or can afford to go through the permitting process yourself. If your Board of Directors is adamant about having the site under construction in 6 months, then you may want to look into acquiring permitted land.
- Build-to-suit: To which degree does the building need to be custom-made? A build-to-suit option entails a development company delivering a building that has been built with your specific needs in mind. You can then buy the building from the developer or even lease it. Typically, companies that are new to an area will want to wait and see and purchase what is already available.
- Distance to customer: No office buildings where customers will be serviced should be put in areas where customers live at too far of a distance or will have a hard time traveling to.
Even these volatile economic times, or should we say, especially these times, offer great opportunities for investors in office property, on the condition that investors ask themselves a series of questions on their (future) needs, their timeline and the needs and desires of their staff and employees.
Ben Crosby, CCIM, ALC, is a managing broker at National Land Realty, the fastest growing real estate land brokerage company in the country.
