The Office Buildings That Will Excel in 2020

NEW YORK—As Mark Fawer, an attorney with Greenspoon Marder’s Real Estate practice group, peeks into his crystal ball for 2020, he sees top-of-the line office spaces that cater to companies that want modern floor plans and amenities succeeding in the nation’s largest office market—New York.

Fawer says these newer buildings with modern infrastructure that accommodates high-speed telecommunications and column spacing and higher ceilings will be winners. Buildings without these features could struggle, even in prime locations.

“I think there will be some softness in the legacy areas of Park Avenue with older buildings,” Fawer says. “I think they will have a harder time. The theme of a tale of two markets even creeps in within particular sectors in the same city.

On the other hand, submarkets, such as Hudson Yards, which just welcomed Facebook for a 1.5 million square feet, and Tribeca will continue to do well.

“Then there are other areas where it’s kind of cool to work and where they’re attracting those within the technology, advertising, media and information sector,” Fawer says. “They’re going to do well.”

While some observers might see WeWork’s stake in the New York office market as an issue, Fawer doesn’t have broad concerns about the co-working giant’s struggles hurting large markets, such as New York City, around the country.

In New York, WeWork controls 6.5 million square feet out 568 million square feet of the overall as of early November, according to NeighborhoodX. While the company does occupy 56% of the 11.6 million square feet of coworking market, it only has 1.1% of the overall office market. Overall, co-working accounts for about 2% on New York’s office market.

With these numbers as background, it’s easy to see why Fawer thinks WeWork’s issues will only have a limited impact on most office owners.

“Overall I don’t really see a big impact,” he says. “Most real estate professionals were wondering how long that ride would last. It never made sense to bet on short-term revenue streams paired with long-term lease obligations.”

Overall, Fawer thinks WeWork’s problems could hit other places harder. “I think that there could be a significant burden on individual buildings with a lot of exposure to WeWork that are in certain smaller office submarkets,” Fawer says.

Even in those submarkets around the nation with high WeWork concentrations, Fawer has seen other co-working options emerge. “There are other folks that are doing things like WeWork,” Fawer says. “Large landlords like Tishman Speyer have created their own co-working product such as Studio, and, obviously, Regus has been around for years. I do not perceive broad problems with the flexible office space market, especially where there is strong demand from tech, financial and digital startups.”