LOS ANGELES—“Although there has been a good amount of talk about traditional firms moving to creative space with open floor plans, they still have—and will continue to have—a need for private offices.” That is according to Jonathan Larsen, principal and managing director at Avison Young. Larsen recently chatted with GlobeSt.com about space needs, and urban market expansion.
GlobeSt.com: You represent tenants on office deals across the nation … what types of tenants are they and what are their space needs?
Jonathan Larsen: I represent a variety of traditional industry sectors including law, financial services, and insurance firms, as well as entertainment and tech firms. Regardless of the diversity of corporate culture, all of my clients are more cognizant of their per-person square-foot allotment and how to minimize it. Changes are also occurring with ratios of attorneys or other executives versus support staff. This ratio used to be two to one for executive to support staff, now it is averaging about five to one.
Space preferences still vary depending on the tenant's business type. Traditional companies prefer more traditional type office space, while tech firms like a creative space with open work spaces, exposed ceilings, and concrete floors. Although there has been a good amount of talk about traditional firms moving to creative space with open floor plans, they still have—and will continue to have—a need for private offices. Publicly traded companies are a key example of this need. They work with confidential information on a daily basis, making it unreasonable to implement solely open offices. I have seen some traditional firms change their offices to better resemble their clients from a design look and feel perspective, however, they still need to integrate private areas and offices, based on the nature of their work.
GlobeSt.com: So, what are you seeing as a result of the shrinking space allotment?
Larsen: As the per-employee square foot allotment shrinks and employee population increases in a given office building, some urban centers are seeing increased parking challenges result. This is an issue in Downtown Los Angeles where public transportation isn't widely used. The transition to public transit, or living a short walk or Uber ride away will help alleviate this a bit, however, I see it taking a while to reach equilibrium.
GlobeSt.com: What markets are your clients looking to expand in?
Larsen: The markets that are expanding right now are urban markets. The Millennial workforce is one that is in high demand by employers. Urban markets offer large contiguous amounts of space where companies can have the opportunity grow within as well.
GlobeSt.com: Do tenants still have the advantage when negotiating leases? Why or why not?
Larsen: New York City, San Francisco, West LA, and Boston, are markets that are very strong and landlord-favored, but other markets like Downtown Los Angeles, Chicago, DC, Dallas, and Atlanta are still seeing opportunities that favor the tenant.
GlobeSt.com: What advice are you giving your clients today?
Larsen: I am advising clients to look at leases two to four years in advance. I am advising them to evaluate their space needs and possibly restructure their lease early to make it more efficient. Stable tenants with good credit have an advantage. Landlords want to keep them in their building and are still open to restructuring a lease and agreeing to tenant improvement dollars.
GlobeSt.com: How do you see that changing in the next six to 12 months?
Over the next six to 12 months rents will steadily rise as they have been in recent months. If tenants want to avoid additional expenditures for office space, I recommend they don't wait any longer to sign a lease. Depending on the market, rents could very well climb 5% to 20% over the next 12 months.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
