(Save the date: RealShare Los Angeles comes to the Hyatt Regency Century Plaza in Los Angeles, CA, on March 27, 2013.)
LOS ANGELES-A growing trend in the office sector is the open floor plans characterized by a lack of individual offices with walls and doors, on which GlobeSt.com recently reported. Even though this floor plan is typical of creative-office use, the trend is moving to the general office sector, which is raising concerns for owners and operators of this space, according to Steven Heller and Elisa Paster, attorneys with Santa Monica-based Gilchrist & Rutter PC.
“These changes raise a host of land use and leasing issues for the industry,” says Heller. “Building investors and operators must evaluate lease provisions carefully so that they are calibrated to appropriately accommodate and adjust to the changing use of office space.”
One land-use issue this trend raises is parking, since more employees can fit into the open-office layout, adds Paster. “One the one hand, more people occupying a single space creates a greater parking demand. But at the same time, parking burden is relieved by telecommuting, alternate work schedules and increased use of public transportation. Local agencies don't always understand these dynamics, so building operators need to act proactively to make sure these changing uses match with municipal requirements.”
Heller tells GlobeSt.com that these changes are occurring in offices in Silicon Valley as well as Silicon Beach, where more tech companies, creative companies and hybrids of those are flocking. “It's not just the Googles of the world anymore—it's law firms, big real estate firms and different kinds of companies. More creative space is permeating out as traditional businesses understand the benefits to having offices with communal space. It can be more efficient for their business because there's a lot more collaboration going on.”
One downside is when having this type of layout affects other tenants in a building. The ability to hold more people in a smaller space may violate not only building and city codes, but may also disturb the sensibilities of neighboring tenants who dislike the potentially noisy, energetic dynamic of such offices—which could violate lease agreements. “Old-school tenants may not appreciate that people are blowing their first-class-building image,” says Paster.
Also under consideration are cost and use issues for things that tenants share, such as HVAC systems, elevators and amenities such as on-site coffee shops. More employees in some of the offices may create problems for other tenants—such as long wait times for an elevator or cup of coffee—and for building operators who suddenly have higher air-conditioning bills due to higher temperatures in densely populated offices.
Another creative-space concern for building owners is allowing tenants to become too creative with the space by, for example, putting in a jungle gym or configuring the office in such a way that it could have limited appeal to future tenants. All of these issues make it necessary for owners and operators to be especially diligent about leases and tenant improvements when renting for creative use.
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