The Instant Group Acquires OfficeSpace.com – Matching demand with supply in CRE.

The Instant Group Acquires OfficeSpace.com

We’re excited to announce that OfficeSpace.com has been acquired by The Instant Group 

This acquisition strengthens Instant’s North American market position, as the OfficeSpace.com domain is one of the continent’s largest sites adding over 300,000 commercial listings to Instant’s already robust global platform.

OfficeSpace.com will remain a standalone brand and platform utilizing the Instant Group’s expertise in technology and marketing to enhance the platform and offerings.

To read to full press release click here: https://www.theinstantgroup.com/en-us/news/instant-acquires-officespacecom-expanding-its-workspace-marketplace-in-north-america/ 

The landscape of commercial real estate is evolving rapidly, and one trend that has gained significant traction in recent years is the increased demand for flex-office spaces. As businesses adapt to the changing dynamics of the modern workplace, the flexibility and convenience offered by flex-office solutions is shaping the future of office and creating opportunities for tenants, landlords, and operators alike.

“Officespace.com is part of our strategy to deepen our offer to meet the needs of our three customers: occupier clients, owner landlords and the operators of flexible space. With search for flexible and traditional workspace converging, this platform adds to our ability to match demand with supply.” -Tim Rodber, CEO of The Instant Group

 

The Rising Demand for Flex-Office

Flexibility has become the cornerstone of the modern workforce, and the demand for flex office spaces has witnessed an unprecedented surge. Businesses are recognizing the need for adaptable workspace solutions that can accommodate the evolving needs of their teams. Whether it’s scaling up, downsizing, or embracing a hybrid work model, flexible office space offers the versatility that traditional leases simply cannot match.

Enterprises are drawn to the flexibility of short-term leases, the ability to customize office layouts, and the convenience of fully furnished spaces. This trend is particularly evident among startups, tech companies, and even established corporations looking to optimize their real estate portfolios in a rapidly changing business environment.

 

Bringing Stakeholders Together

To effectively meet the growing demand for flexibility and optionality,  an integrated platform that serves tenants, brokers, and property owners is proving to be indispensable. This all-in-one solution streamlines the leasing process, making it more efficient and transparent for all stakeholders across the workspace ecosystem.

 

Tenant Convenience:

  • Tenants benefit from a user-friendly platform that provides a comprehensive view of available flexible workspaces.
  • Easy access to real-time data on pricing, amenities, and lease terms allows tenants to make informed decisions quickly.

Broker Efficiency:

  • Brokers can leverage a centralized platform to showcase available spaces, reducing the time and effort required for property searches.
  • Real-time communication and collaboration tools streamline the leasing process, enhancing the overall efficiency of brokers.

Property Owner Optimization:

  • Property owners gain access to a broader audience of potential tenants through an integrated platform.
  • Analytics and reporting tools enable property owners to make data-driven decisions, optimizing their offerings to meet market demand.

 

Importance of Matching Demand with Supply

In the realm of commercial property spaces, particularly flexible space, it’s increasingly critical to match demand with supply. A balanced marketplace ensures that tenants find spaces that meet their specific requirements while property owners and operators maximize occupancy rates and revenue.

 

Dynamic Market Response:

  • Real-time matching of demand with supply allows the market to respond dynamically to changing preferences and trends.
  • Property owners can adjust offerings based on demand data, optimizing their portfolio to align with market needs.

Enhanced Tenant Experience:

  • Matching demand with supply ensures that tenants find spaces tailored to their needs, fostering a positive and satisfying leasing experience.
  • The right balance avoids issues of oversupply or scarcity, creating a more stable and sustainable marketplace.

As the commercial real estate landscape continues to evolve, the shift to flexibility and agility are reshaping the way businesses approach their workspace needs. As an integrated platform that caters to tenants, brokers, and property owners, together with The Instant Group, OfficeSpace.com will play a pivotal role in meeting the rising demand for flexible workspace and offering unique solutions for the world’s most dynamic clients, owner landlords, and operators.


About The Instant Group

The Instant Group is the largest global marketplace for flexible workspace, creating a smarter working world for everyone. The Instant Group has the industry’s leading data platform, market-leading corporate real estate consultancy, and market-leading sustainability practice to enable smarter hybrid working.

The Instant Group and OfficeSpace.com

The Instant Group serves more than 250,000 businesses annually, operating 24/7 through an integrated platform in more than 170 countries and 5,500 cities. In 2023 alone, Instant expanded its reach with new operations in South Africa, Mexico, New Zealand, India, and Korea.

Undeniable expertise. How Trilogy CRE has achieved continuous growth alongside client success.

In this edition of the OfficeSpace.com blog, we turn the spotlight on a real estate professional who has found that commanding market share and growing his business go hand in hand. We’re excited to showcase a remarkable tenant rep broker who has harnessed the power of Lead Connect to supercharge their real estate business. Through his dedication to every lead, Matt has not only grown his business but also transformed the way businesses, large and small, find their perfect commercial space in Arizona.

Join us as we delve into Matt’s success and explore how he has built a powerful business uniquely poised to grow and expand, even amidst the challenges of today’s commercial real estate markets.

Meet Matt Bustamante

Meet Matt Bustamante – owner of Maricopa County, AZ-based Trilogy CRE

Matt has been serving Phoenix, AZ, and beyond for the last 20 years, building his business by focusing on delivering outstanding service to every client, every time. It goes without saying that after 20 years, he has a long list of repeat customers, and the referrals continue to roll in, but in the midst of the challenging economic times of the past few years, his business has continued to grow rather than falter. I connected with Matt to discuss how he has navigated these challenges and learn more about how he has built one of the most powerful tenant representation businesses in Arizona.

 

Matt is a long-time Lead Connect customer, receiving inbound tenant rep leads from OfficeSpace.com in Maricopa County that he and his team of specialized brokers help in their “search, selection, negotiation, and occupancy of retail, office, and industrial space in the Phoenix Metro area.”

“I’ve been with you guys for three years now…[before], I was dumping thousands of dollars a month into advertising, and I was getting some leads from it, but then, that’s when I discovered [OfficeSpace].” 

Matt continues, “So I figured I’m spending a couple thousand dollars a month, even on the low end in the beginning, on advertising. Or I can spend [my advertising dollars differently] over here and get a better result. And you guys already had the SEO down, and that’s where I was lacking. So, instead of me funneling leads to other people and then taking a cut from them, I was just pursuing them myself.”

To clarify Matt’s comments – a subscription to Lead Connect starts at only $199/mo and, in most cases, is much more cost-effective than traditional lead generation or targeted advertising services in commercial real estate. Even better, Lead Connect delivers leads in real-time helping successful brokers like Matt engage leads in their markets faster.

 

All successful CRE pros know that inbound leads are essential for growing business alongside referrals and return customers and that often owning these leads is the key to success. I asked Matt how OfficeSpace.com has played a part in growing his business and his lead pipeline.

“Honestly, it came down to the volume of leads. I wasn’t able to obtain [more leads] without spending even more money to obtain the same amount of leads that you guys could give me.” Matt explains further, “So I just took them all in-house and just revamped everything. I realized I can do it better myself, so I just decided to work 20 to 30 hours more than I was already working to make sure that everything was handled properly.” 

Matt hits home that his focus is bringing the same level of dedicated service to every client is the foundation of his success. Being the exclusive tenant rep broker in Maricopa County has allowed him to grow his team and establish Trilogy CRE as the undeniable expert in the area.

“I just came to a decision, once I was going to get the entire territory exclusively, I would bring everybody in-house.  This would allow me to work with and further educate my team on the importance of customer service and refine the more intricate aspects of tenant representation.”

 

We continue discussing the growth of Trilogy CRE and how Matt has leveraged OfficeSpace.com to support his fast-growing business. “At first, the business from OfficeSpace was about a third of my total business. Now, I’m getting referrals from those clients that closed from OfficeSpace. These additional referrals aren’t directly attributable to OfficeSpace, but extremely valuable to our success.” He adds, “I’m a numbers guy. I look at where everything’s coming from, and it’s important. How do you grow if you don’t know where you come from, right?”

Continuing to discuss Lead Connect and how Matt utilizes the inbound leads, he says, “There’s a lot of value to what you guys bring. So, I just figured instead of trying to reinvent the wheel, I’ll just run with what you guys have because that’s what I was trying to do.”

 

To wrap up our conversation, I asked Matt what he feels is the most significant opportunity of being in the tenant rep space.

Without skipping a beat, he dives in, “That’s easy for me. First of all, you can’t be good at everything. I started out almost 20 years ago, primarily representing small mom-and-pop businesses, which continue to remain important to my success. These businesses are crucial to our economy and local communities.  These relationships built the foundation on which Trilogy has grown into national tenant representation for companies both small and large.  To this day, I have never represented a landlord.” He adds that he refers this business to earn income from the referrals rather than trying to spread his focus outside his expertise. “[This] allows me to concentrate on doing what I love and what I do best, which is tenant rep. “

 

By serving clients large and small, Matt confidently closes more deals than there are weeks in a year, and that number is growing as he continues to scale Trilogy CRE. He closes by stating, “Lead Connect has doubled the volume of leads that I have coming in from my existing personal book of business.”

 

At OfficeSpace.com, we’re proud to deliver valuable leads to commercial real estate professionals. Tenant rep brokers like Matt Bustamante are a testament to the necessity of tenant representation for businesses large and small. Matt has used his experience, along with inbound leads from OfficeSpace.com, to expand his reach and ensure he delivers the best client experience to Maricopa County and beyond. 

 

You can learn more about Matt and Trilogy CRE by visiting their website here – www.TrilogyCRE.com. 

 

Want to learn more about Lead Connect?

Are you looking to grow your inbound lead pipeline and become a trusted expert in your market? Learn more about Lead Connect from OfficeSpace.com here, or reach out to our team to get started.

OfficeSpace.com partners with Lendio to make capital more accessible for small businesses.

According to the Small Business Administration (SBA), 99.9% of businesses in the United States are small businesses. This means that there are over 33 million small businesses in the US. Small businesses are defined as businesses with fewer than 500 employees.

Small businesses play a vital role in the US economy. They create jobs, drive innovation, and boost economic growth. In fact, small businesses employ around 61.7 million workers, making up almost half of all employees in the U.S.

However, small businesses also face many challenges. One of the biggest challenges is access to capital, which leads to many of them failing. Small businesses sometimes don’t have the collateral or credit history to qualify for traditional bank loans. This can make it difficult to finance growth, expansion, or survival. The world of commercial real estate and small business financing is complex and many small businesses seek trusted partners to help guide them towards their goals.

OfficeSpace.com and Lendio: providing support to small business growth.

OfficeSpace.com has a long-time partnership with Lendio, a leading small business loan marketplace. Whether you’re searching for your first commercial space or looking to expand your business, OfficeSpace.com.com and Lendio are here to support your success.

Who is Lendio?

Lendio is a small business loan marketplace, with a large network of highly-vetted lenders and financial products. With a single free application, you can compare loan products and lenders, and get custom funding offers suited to your business needs. Applying with Lendio does not hurt your credit score, and is obligation free. 

When you apply through Lendio, you’re assigned a dedicated personal funding manager who will ask about your needs, walk you through different loan options, and help you choose the perfect small business loan.

You won’t have to deal with brokers, banks, or convoluted financial jargon. Lendio keeps it simple so you can make informed decisions and find financing fast.

Why OfficeSpace.com chose Lendio

With over a decade of experience in small business lending and 20,000+ TrustPilot reviews, small business owners trust Lendio with their business financing needs. Lendio has helped secure capital for over 350,000 small businesses just like yours.

What financial products are available with Lendio?

Whether you’re looking to fund your next commercial office space, or something else related to expanding your business, Lendio can match you to the right lenders and help you compare offers.

 These are the most common financial products small business owners choose with Lendio:

  • SBA Loan
  • Business Line of Credit
  • Business Term Loan
  • Business Cash Advance
  • Accounts Receivable Financing
  • Equipment Financing
  • Commercial Mortgage

 

How do I get started?

Click here to get started with your application. Lendio’s in-house customer support team is available to help with any questions you may have throughout the process.

Learn more about Lendio here: www.lendio.com

Exploring commercial leasing. Expanding your commercial real estate business.

Exploring commercial leasing. Expanding your commercial real estate business.

The commercial real estate (CRE) market is constantly evolving, and businesses that don’t adapt to change are likely to miss out on opportunities. One of the most important trends in CRE today is the growing demand for leasing services.

In 2023, businesses of all sizes are still leasing commercial space. Small businesses are leasing space to accommodate their growth, while large businesses are leasing space to expand or scale back their operations.

Modern demand for leasing

There are several reasons why businesses lease commercial space. Small businesses often lease space because it’s a more affordable option than buying. They also don’t have to worry about the upfront costs of renovations or maintenance.

Large businesses lease space for a variety of reasons. They may need to expand their operations into a new market, or they may need to consolidate their operations into a single location. These large businesses may also be looking for a more flexible lease that allows them to adjust their space needs as needed.

Commercial real estate professionals who serve leasing have long been using the demand for leased commercial space to bolster their businesses, many building entire careers and businesses around tenant representation. In the last six months we’ve seen growing demand for commercial space for lease in markets such as: Phoenix, Los Angeles, San Diego, Seattle, Orange County, Harris County, Miami, and Las Vegas.

If your CRE business doesn’t serve leasing, you’re missing out on a major opportunity to generate revenue and grow your business. Here are a few tips for incorporating commercial leasing into your business:

Target the right clients. 

Not all businesses are looking to lease commercial space. Focus your efforts on tenants that are actively looking to lease, such as small businesses that are growing or large businesses that are expanding or consolidating.

Build relationships with landlords.
Landlords are a valuable resource for finding commercial space for your clients. Get to know the landlords in your market and build relationships with them. These relationships can be mutually beneficial for years to come and continually generate recurring business as tenants cycle over time.

Use technology to your advantage. 

There are a number of online tools that can help you find commercial space and manage leasing transactions. Use these tools to streamline your workflow and improve your efficiency.

OfficeSpace.com has unique solutions designed to help you expand your business and grow your lead pipeline. Click here to learn more about our solutions for CRE pros serving leasing.

Who can serve the demand for commercial leasing?

There are many different types of businesses that can serve the demand for commercial leasing.

Tenant rep brokers specialize in representing tenants in lease negotiations. They help tenants find the right space for their needs and negotiate the best possible terms.

For sale CRE brokers who are looking to expand their business can also serve the demand for commercial leasing. They can use their knowledge of the market to help tenants find space and negotiate leases.

Residential brokers with commercial spaces for lease can also get involved in commercial leasing. They can use their network of contacts to find tenants for their commercial properties.

Find a network that works for your success.

Brokerage networks can be an excellent way to make new connections and help build stronger businesses. CORFAC’s Jonathan Salk says” we want good, quality people”. A true testamant to the types of relationships CRE pros can build within brokerage networks.  While connecting with like minded professionals alone won’t double your business overnight, the sharing of best practices and knowledge is another excellent advantage brokers can take advantage of. You can learn more about CORFAC by visiting their website here.

How to get started in leasing.

If you’re interested in getting started in commercial leasing, here are a few things you can do:

Get your first commercial lease. 

This will give you experience and build your confidence. You can start by working with a tenant rep broker or a for sale CRE broker who has commercial leasing experience.

No lead left behind

Be willing to serve any commercial lead that comes your way. Often, businesses looking for a small commercial lease will return when it comes time to expand. Build your network by helping tenants to find the perfect space and helping owners fill their spaces.

Position yourself as an expert

Be the leading CRE pro in your market by serving for sale and for lease (because your competitors don’t). This will make you more valuable to clients and help you attract more business over time as your network grows.

Key opportunities in commercial leasing

There are a number of key opportunities in commercial leasing including:

  • Unlock new revenue streams. Commercial leasing can be a very profitable business. By incorporating commercial leasing into your CRE business, you can tap into a new revenue stream and grow your business.
  • Lots of low cost tools to help you succeed. There are a number of low cost tools available to help you with commercial leasing. These tools can help you streamline your workflow and improve your efficiency.
  • Position yourself as an expert in your market and own your position in you market. By serving the demand for commercial leasing, you can position yourself as an expert in your market and attract more business.

 

If you’re looking to grow your CRE business, commercial leasing is a great opportunity. By following the tips above, you can get started and start generating revenue today.

A guide to navigating business financing. Small business loans simplified.

Starting or running a small business is a big undertaking, but it can also be incredibly rewarding. However, one of the biggest challenges that small business owners face is financing. Whether you need money to start your business, expand your operations, or purchase equipment, there are a variety of financing options available to you.

The right financing option for you will depend on your specific needs and circumstances. For example, if you are a first-time entrepreneur with limited collateral, you may need to consider a government-backed loan or a microloan. If you have a good credit score and a solid business plan, you may be able to get a traditional bank loan. You may also want to consider alternative financing options, such as peer-to-peer lending or crowdfunding.

It is important to compare different financing options before you choose one. Consider the interest rate, the repayment terms, and the fees associated with each option. You should also make sure that you understand the terms and conditions of the loan before you sign anything.

There are a few things you can do to increase your chances of getting approved for financing. First, make sure that you have a strong business plan. This will show lenders that you have a viable business and that you are a good risk. Second, have good credit. A good credit score will make you more attractive to lenders. Finally, be prepared to provide collateral. Collateral is something of value that you can pledge to the lender if you default on the loan.

Whether you are a small business owner who is leasing or owning your commercial space, there are a number of different types of small business loans that can help you finance your office needs. Here is a more detailed overview of some of the most common types of small business loans:

Types of Small Business Loans

SBA Loan

The Small Business Administration (SBA) offers a variety of loan programs to small businesses, including loans for real estate, equipment, and working capital. SBA loans are typically easier to get than traditional bank loans, and they often have lower interest rates.

The most common SBA loan program for financing office space is the SBA 7(a) loan. This loan can be used to purchase or lease commercial real estate, as well as to purchase equipment and other business assets. SBA 7(a) loans have a maximum loan amount of $5 million, and they can be repaid over a term of up to 25 years.

To qualify for an SBA 7(a) loan, your business must meet certain requirements, such as having a good credit score and a sound business plan. You will also need to make a down payment of at least 10% of the loan amount.

Some examples of situations when a small business might consider an SBA loan:

  • To purchase a commercial building.
  • To lease a commercial space.
  • To renovate a commercial space.
  • To purchase equipment for their office.
  • To cover the cost of moving into a new office space.

OfficeSpace.com partners with Lendio to provide you with business financing options. 

OfficeSpace.com has a long-time partnership with Lendio, the nation’s leading small business loan marketplace. Whether you’re searching for your first commercial space or looking to expand your business, OfficeSpace.com.com and Lendio are here to support your success.

Lendio is a small business loan marketplace, with an extensive network of highly-vetted lenders and financial products. With a single free application, you can compare loan offers and choose the right financing for your business. You won’t have to deal with brokers, banks, or convoluted financial jargon. Lendio keeps it simple so you can make informed decisions and find financing fast.

Click to learn more about business financing options with Lendio.


Business line of credit

A business line of credit is a revolving loan that you can use as needed. This type of loan is ideal for businesses that need access to short-term financing for things like unexpected expenses or seasonal fluctuations in sales.

Business lines of credit typically have a credit limit, which is the maximum amount of money you can borrow. You only pay interest on the money you actually borrow, and you can repay it at any time.

Here are some situations when a small business might consider a business line of credit:

  • To cover unexpected expenses, such as a sudden increase in rent or utilities.
  • To meet seasonal fluctuations in sales.
  • To finance a short-term project, such as remodeling their office space.

 

Business Term Loan

A business term loan is a fixed-rate loan that you repay over a set period of time. This type of loan is ideal for businesses that need to finance a major purchase, such as equipment or real estate.

Business term loans typically have a longer repayment term than business lines of credit, such as 5 to 10 years. They also have a fixed interest rate, which means that your monthly payments will be the same each month.

Here are some situations when a small business might consider a business term loan to finance commercial space:

  • To purchase commercial real estate.
  • To purchase equipment for their office.
  • To finance a renovation of their office space.

 

Business Cash Advance

A business cash advance is a short-term loan that is typically repaid within a few weeks or months. This type of loan is often used to cover unexpected expenses or to meet payroll.

Business cash advances typically have high interest rates and fees, so they should only be used as a last resort.

Here are some situations when a small business might consider a business cash advance:

  • To cover unexpected expenses, such as a sudden increase in rent or utilities.
  • To meet payroll if there is a delay in receiving payments from customers.
  • To finance a short-term project, such as remodeling their office space.

Accounts Receivable Financing

Accounts receivable financing is a type of loan that uses your unpaid invoices as collateral. This type of loan can be a good option for businesses that have a lot of outstanding invoices.

With accounts receivable financing, the lender will advance you a percentage of the value of your invoices. You will then repay the loan, plus interest, as your customers pay their invoices.

Here are some situations when a small business might consider accounts receivable financing:

  • To cover a temporary cash flow shortage.
  • To finance a purchase of inventory or equipment.
  • To meet payroll if there is a delay in receiving payments from customers.

Equipment Financing

Equipment financing is a type of loan that is used to purchase equipment. This type of loan can be a good option for businesses that need to upgrade or replace their equipment.

Equipment financing typically has a term of 3 to 5 years. The interest rate will depend on your credit score and the type of equipment you are financing.

Here are some situations when a small business might consider equipment financing:

  • To purchase new office furniture.
  • To purchase new computers or other electronic equipment.
  • To purchase machinery or equipment for their manufacturing or production process.

Commercial Mortgage

A commercial mortgage is a loan that is used to purchase or refinance commercial real estate. This type of loan is typically for a longer term than other types of small business loans, such as 10 to 20 years.

Commercial mortgages typically have a fixed interest rate, which means that your monthly payments will be the same each month.

Here are some situations when a small business might consider a commercial mortgage to grow or expand operations:

  • To purchase a commercial building.
  • To refinance an existing commercial mortgage.
  • To expand their office space.

 

When choosing a small business loan, it is important to consider your specific needs and circumstances. Some factors to consider include the amount of money you need, the length of time you need the money, and the interest rate. You should also compare the terms and conditions of different loans before you choose one.

If you are a small business owner who is considering financing your office space, it is important to talk to a lender to learn more about the different types of loans that are available. A lender can help you determine which type of loan is right for your business and can help you get the financing you need to grow your business.

Here are some additional tips for small business owners who are considering financing their office space:

  • Do your research. Before you apply for a loan, it is important to do your research and understand the different types of loans that are available. You should also compare the terms and conditions of different loans before you choose one.
  • Get pre-approved. Getting pre-approved for a loan can give you a better idea of how much money you can borrow and what the terms of the loan will be. This can help you negotiate better terms with the lender.
  • Have a good credit score. A good credit score will make it easier to get a loan and will get you better terms.
  • Prepare a strong business plan. A strong business plan will show the lender that you have a viable business and that you are a good risk.

 

By following these tips, you can increase your chances of getting the financing you need to finance your office space and grow your business.

 

Is the foundation of the office sector crumbling? The future of the office – and what’s to come of the office space.

Office present and office past

The economic uncertainty of the past two years has no doubt taken its toll on commercial real estate – particularly in the office sector. With many companies adopting remote work policies, office vacancy rates have risen in many cities, and landlords have faced a difficult market. In some cases, companies have renegotiated their lease terms or decided to sublease their excess office space. This has resulted in downward pressure on rental rates and overall property valuations.

While interest rates remain on the rise and many assets across all classes are headed towards distress, some markets show signs of improvement, while others are feeling the pressure

However, it’s not all bad news for office spaces as an asset class. While some companies have adopted remote work policies, many others have remained committed to the traditional office setting. Some businesses have even increased their demand for office spaces as a way to comply with social distancing requirements and to ensure their employees have a safe and productive workspace.

While uncertainty surrounds the future of the office as a workspace, the more important question is this: what is to come of the office building? 

 

What is to come of office spaces and buildings?

While office as an asset class has certainly been in the spotlight over the last year or two, it is time to start considering the new realities faced by these assets. We’ll cover this from two perspectives: the office as a workspace, the office building as a commercial asset.

 

The office – a common workplace…but is it timeless?

Most of us have, or are currently working from an office. A staple and widely accepted workplace setting leading up to the COVID-19 pandemic. Since 2020, we’ve seen a shift to remote and hybrid work leading to a dramatic decrease in office utilization and in some cases necessity. The question remains: will this shift to remote and/or hybrid be permanent?

The shift from a largely full-time in-office setting to hybrid and remote was fueled by concerns around social distancing amid the pandemic and happened quickly. As we’ve seen, the return to the office has been much slower, and in some cases hybrid and fully remote work may continue. However, while these settings may be successful for specific roles and organizations, the office itself has been cemented as a standard workplace over time. While the transition back to a predominantly office environment may take time, it is a very likely trend that has already begun to emerge. What remains to be seen is at what capacity will office work make its comeback – will the office be the norm once again, or is hybrid here to stay?

 

The office building

Surrounded by uncertainty in demand, the next question is what’s to come for the office building itself. Offices come in many different shapes, sizes, and values, and as anyone in commercial real estate knows, they’re present in every market. Along with massive variance in value, these assets carry varying levels and types of (often complex) debt and most importantly varying capability to produce positive returns.

With cheap debt no longer on the table and high amounts of vacancy, many assets are reaching debt maturity and lacking the profits necessary to effectively refinance at current rates. So, what are the options for owners facing tough times amidst challenging market conditions?

 

Weather the storm

While difficult – one option for underperforming assets is to wait out the current market conditions and hope for a change in office sentiment and interest rates. Assets that are able to stay afloat amid vacancies and tough financing are more likely to become profitable again in the future. In some cases, owners may be able to restructure their financing. This may require demonstrating a viable plan to improve the property’s performance and may involve additional fees or covenants. Further, owners may seek to bring in new equity partners to inject additional capital into the property and pay off the existing debt. This may require negotiating with the existing lender to subordinate the debt or convert it into equity.

 

Convert?

Another possibility is adapting the office building. Converting a standard office to apartments or retail, or a mix while possible is tremendously expensive and not always a viable option – dependent on the particular building based on a myriad of factors including: location, zoning, size, layout, etc.

Using some general assumptions – the average office building in the U.S. is around 20,000 sq./ft.. And the costs to renovate an office into an apartment and/or retail can be between $100-$300 sq./ft. It could cost upwards of $6,000,000 to update the average office building before it’s ever able to generate revenue aside from traditionally leased office space. Compare this to a rough estimate of that 20,000 sq./ft. Office asset’s approximate value of $5-6 million dollars and the cost of converting is extremely steep and carries a high level of risk if the newly renovated asset cannot perform and meet its debt obligations. 

It’s important to note that while the cost of converting an office building into apartments (or other types of commercial space) can be significant, the potential returns on investment can also be substantial, particularly in high-demand urban areas where there is a shortage of affordable housing. With careful planning and execution, converting an office building into apartments can be a viable and profitable investment strategy for real estate developers and investors.

 

The future of office

Despite the widespread adoption of remote work, it’s unlikely that the traditional office space will disappear altogether. In-person collaboration and face-to-face meetings are still essential for many businesses, and there will always be a need for physical office spaces. However, the office spaces of the future may look quite different from those of the past.

Owners and investors of office assets must be prepared to adapt or weather the storm of current economic challenges. Like all markets, commercial real estate has its ups and downs. Investors who are able to hold their assets amid these tough times have the potential to see profits return in the future as the economy recovers, and as more workers return to the office. Additionally, there will be opportunity for savvy investors large and small to capitalize on distressed office assets as some will ultimately fail. 

The only certainty in the CRE markets of 2023 is that uncertainty is likely to prevail. Investors must remain vigilant and ready to entertain and embrace new ideas and the new reality of the office sector.