Last week I discussed the future of office space and how companies are now catering the work environment based on who is occupying it, the Millenials. As a follow-up, I discovered that companies are not only converting their current spaces to plan for the future, but they are now making the move from the suburbs back to urban cities.
“This is a real trend, and it’s driven by the best way to recruit the Millenials”
In the 1950’s, the future of quality living was seen to be in the suburbs, but as the generation who thought the American Dream was to live in a nice neighborhood and own a home with a large yard (the Baby Boomers) is retiring from the workforce, where does the future of employment lie? It lies in the CBDs, the Central Business Districts.
Companies who are making the move from the sprawled and decentralized business parks of the suburbs back to the city’s urban core have two main motives:
1) Shred surplus space
2) Locate to where the labor is
As previously discussed in Rightsizing Office Space, by restructuring the layout of the office place with a reduced number private offices and assigned work spaces, companies are able to reduce the average work area per employee from 200 sq ft to 50 sq ft. The end result is less required overall square feet, which means that they could now afford to occupy smaller or higher quality places in downtown locations.
According to a study by ULI’s Industrial and Office Park Council, the Millenial generation, 17 - 34 year olds, prefer urban lifestyles which have access to mass transit. The place that accommodates the lifestyle sought by many Millenials is the urban city environment. Since the Millenial generation is set to make up over half the workforce by 2014, the companies looking to hire the new talent want to be accessible.
What does this mean for the real estate world?
This trend has made a start to revitalizing the urban core of our cities, but did it at the expense of the suburbs. The vacancies of the CBDs have been reduced to 15% and suburb office space vacancy has risen to just above 20%.
There doesn’t seem to be a “win-win” option available when it comes to real estate and job growth in this current down economy, but lets hope that the newfound investment of downtown can provide the jobs that recent or soon to be college grads are in search of.
I think Downtown Los Angeles has definitely made a significant improvement and changed it's brand into a more livable space. On the other hand, I do not see everyone flocking to live their. I think Santa Monica and the Westside have done a better job branding themselves and creating an environment conducive to a big urbanization movement.
ReplyDeleteAlso, with the lack of significant job growth, like you said, it is tough for companies or developers to spend a significant amount on re-positioning their buildings. The companies that lease out the spaces just don't seem to be doing well enough to expand, as many are still downsizing. There is still a lot of recovery that needs to happen in the real estate and housing market.
You stated that companies will go to where labor is. I think people will travel from suburbs to jobs if they can get one in a Downtown. I am not convinced that this would be a main reason to move to a downtown.
You made some great points and observations. I enjoy your postings! Thanks.
This is definitely a hot topic right now, especially for us USC students. Being so close to downtown LA, I've noticed the revitalization that the urban core has been undergoing for some time now. I recently took a bus tour through LA that highlighted many of the efforts to draw not only residents, but businesses back into the center of downtown. I think it's a great initiative all around, the Millenials get what they want, and urban sprawl can be reduced. Additionally, this could help LA to get a better mass transit system - which would go far in the way of reducing traffic congestion.
ReplyDeleteI like the idea of a more established downtown in Los Angeles! The new Millennial generation is definitely more fitting in a downtown area and the architects know this. It has been wonderful to see all these modern buildings appear to create more of a substantial downtown area where we all can feel like we have a more "busy-work" related feeling rather then the rest of the "outspread-suburban" feeling that the rest of Los Angeles has.
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