Commercial Office Space Expected Trends for 2019

Posted on February 20, 2019

One of the most overlooked assets in the real estate industry is commercial office spaces. If you’re thinking of investing in real estate, you don’t have to be focused on looking for residential properties to sell or rent out all the time. You can have the very same income growth potential by renting out commercial office spaces.

There is big market potential for this since more and more startups are setting up headquarters in the Washington area. There is also an exodus of companies coming from the California area that want a change of scenery and to take advantage of Washington’s competitive market prices.

Like any other investment opportunity, commercial office spaces are driven by the complexities of the market. The market soup of macroeconomics and supply and demand trends tend to push and pull on how these assets perform. The growth of white collar jobs, the exodus of startups and tech hubs, the developments in the local community and the improvement in the regional economy all play a role in asset performance. The Washington area has been enjoying a surge in recent years due to being the next silicon valley.

Here’s what we can expect in the commercial office space area in 2019:

Finding Opportunity in the Opportunity Zones
The Opportunity Zone program, created by the 2017 Tax Cuts and Jobs Act to leverage private capital to improve distressed areas across the US can be a game changer. GlobeSt.com says “ Under the program, investors can invest unrealized capital gains in an Opportunity Fund that in turn finances residential or commercial development, or even business enterprises, within the designated Opportunity Zone census tracts. The longer investors leave their money in the fund, the more tax forgiveness they get.”

Investors are waiting for the final say from the Dept. of Treasury and the IRS regarding the Opportunity Program. This could impact development activity that could lead to a boom in investments in the commercial office space market.

High Demand from E-Commerce Players will continue to drive the Industrial Boom
In 2018, Industrial real estate demand has soared to new heights. That trend is expected to continue in 2019.

There is a big market demand for logistic properties and has been proven to be a lucrative addition to the commercial property portfolio. This is driven by the need for big bulk warehouse facilities in areas near ports and motorway networks.

Major construction projects will affect commercial property prices
Construction is booming in the area and there are a lot of infrastructure projects to be excited about. These are some of the key infrastructure projects to watch out for.

● A $392 million, thirty-eight storey 2+U tower, several blocks east of Pike Place Market
● Google’s 322,000 square foot campus expansion with the first two blocks to be completed next year, and a third block reported to be ready in 2021.
● Facebook’s $246 million project of two structures called the Arbor Blocks. They are six stories each and total 384,000 square feet, along with 4,100 square feet of retail.
● Bellevue Square Expansion – Puget Sound Business Journal reports a planned Bellevue Square Expansion project in 2019. The construction project will add two towers – a combined hotel and apartment building and a dedicated luxury apartment building.
● A $128 million four skyscraper Elev8 project – Stanford Hotels acquired controlling interest in this 4 skyscraper project in the rezoned area of NE 8th St between 108th and 110th. On this site will rise two 40-story towers one would be 351 luxury condominiums for sale and one would be 448 apartments for rent with retail at the base of both. Then in a second phase, a 3rd residential tower and an office building.
● Vulcan Real Estate’s massive half block, 600-foot tall office development to start in early 2020. It will have 937,000 square feet of office space.
● Onni Group of Cos. plans to develop an 850,000 square feet three tower mixed-use project in 106th Ave. NE.
● Fanna group of Cos’ 18 storey mixed-use tower building with 420,000 square feet of office space is in “pre-application” status.
● Wright, Runstad & Co, and Shorenstein 36 acre mixed-use project – with Facebook reportedly considering leasing Block 16, a 316,000 square feet space

Once these projects are completed, they could generate jobs that could drive the demand for commercial office spaces.

If you’re looking investing in commercial office spaces, here are some tips to make your property stand out:

1. Tailor your office space to cater to your target niche. If your target is start-up companies or tech companies, you might want to equip your office rental space with provisions for high-speed internet and high-quality technology. You could also provide tenants with a choice of an open floor plan of one with offices, cubicles or partitions. If your target is a retail store, you might want to equip your commercial space with provisions for a storefront or even a balcony or foyer for alfresco dining or working outdoors.
2. Keep the community in mind. If your commercial office space is in a residential area, you might also be able to rent out your space to community groups or local club for their weekly meetings and get-togethers.
3. Keep tenants wellness in mind. The prevailing trend is green workspaces, so try to incorporate natural light, a garden, walkways, and a footpath or bike path.
4. Consider the activities of your target market and plan your commercial office space accordingly.
5. Equip your commercial office space well so that you don’t have to spend time or money renovating, maintaining, re-organizing, or repairing your commercial office space.

At Davis Property Management, we can give you sound advice about the commercial property market. Both newbie investors and veterans will appreciate our knowledge of the commercial rental property market. We can help you understand it better. Choose from a range of services from our offerings to help you get started with property management. Talk with us about your real estate needs. Connect with us today.