As the worst of the COVID-19 pandemic in the United States seems to be behind us, and companies are starting to bring their people back into offices — at least some of the time (only about a quarter of the workforce is expected to continue working full-time from home) — interest in office property is picking up again.
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. Following are 11 things buyers should consider when investing in office property:
1. Size of the site: What size must the property be? The answer to this question is a function of two variables: the actual size needed at purchase and the maximum size the site must reasonably have in the foreseeable future. The square footage of the land that will be required for a new build must always accommodate parking; very often, local land development codes will dictate to owners how much parking space they need to provide. 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.
2. Size image: To what degree will the office building advertise the company to passers-by? Some buyers deliberately choose busy locations because they know their new office buildings with the logo will be seen by thousands of people each day. If this is important to you, find a location that accommodates this.
3. Parking: For existing buildings, available parking is an important factor to consider. For offices still to be built, parking space needs to be factored into the budget (as discussed above).
4. Expansion plans: As previously mentioned, there needs to be room in an office building to carry future growth; in some scenarios, a business that is growing at a fast clip might already allow for the space needed for a future second building.
5. Floor area ratio: This variable pertains to the efficient use of space. A 50,000-square-foot building on paper could provide sufficient room, but if that building has a big lobby on more than one story and wide stairways, only 60% to 70% of the space can be used or rented out.
6. Amenities: Where will the staff have lunch? Employees don’t like losing 50% of their lunchtime driving to and from a restaurant. In addition to restaurants, other amenities, such as hair salons and dry cleaners, are also popular with employees.
7. 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.
8. 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 parents.
9. Permitting: If a new office building is to be constructed, your 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 beginning construction in six months, you may want to look into acquiring permitted land.
10. 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.
11. Distance to customer: No office buildings where customers will be serviced should be put in areas where customers live too far away or will have a hard time in travel.
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 timelines and the needs and desires of their staff and employees.
Ben Crosby
National Land Realty
Winter Haven, FL
(863) 293-5600
