Urban Suburbs a Potential Bright Spot for Office
Workers would choose the suburbs over an urban setting, especially if it is “walkable.”
So-called “urban suburbs” are a lone bright spot for office landlords, according to the Yardi Commercial Edge National Office Report.
Now that more workers are facing the reality of returning to the office, many, especially young ones, are looking for walkable and amenity-rich suburban neighborhoods that can support new mixed-use developments, said Yardi’s Evelyn Jozsa.
Commercial Edge said that commute times are the most significant factor affecting the decision to return to the office and that workers would choose the suburbs over an urban setting because of it.
It’s been a tough year for the office sector, with Commercial Edge reporting the national vacancy rate to have moved up 120 basis points year-over-year, reaching 17.8% at the end of September.
Peter Kolaczynski, CommercialEdge Senior Manager, said in prepared remarks, “Firms that have a workforce spread over a large area may choose to use a hub-and-spoke system.
“This involves keeping a central “hub” office (usually smaller) while opening smaller satellite offices in the suburbs for workers living there,” Kolaczynski said. “In addition, the development of large mixed-use projects will require the cooperation and coordination of private developers and public entities, each playing a crucial role.”
The report suggested that suburban offices that cannot provide mixed-use destinations for workers may be targeted for conversion.
“In city centers, the focus is on turning vacant offices into much-needed housing,” Jozsa writes. Although there are some signs that 2024 could be a turning point for office demand.
“While suburban offices face fewer logistical hurdles to housing conversion than office towers, a suburban office that isn’t amenitized enough to attract workers may not be an ideal location for housing either,” she writes.
“According to our office real estate outlook, we anticipate that, subject to zoning, suburban office conversions may target infill industrial facilities for last-mile delivery or data centers.”