Want To Fill Your Office Space? Think Cool And Sophisticated

Nationwide, the U.S. could end the decade with 1.1 billion square feet in vacant office space, according to a Cushman & Wakefield report. In addition, the report found that 25% of the country’s 5.56 billion square feet of office space may be considered obsolete. With those daunting numbers, it’s unsurprising that the bloom is off the rose for commercial real estate (CRE) investors considering the office space sector. But a New York City-based CRE agency is a bit more bullish on the future of office space as long as investors and landlords are open to a bit of creativity. 

“If you have a beautiful office space you can walk into and it doesn’t feel like one where a company just went bankrupt, it could make it turnkey,” Chris Okada, CEO of Okada & Co., told Benzinga. The company has spent 54 years in NYC navigating the CRE landscape. “Office space is 90% of what we do,” Okada said the key is getting more creative. “There are co-working spaces now that have multiple podcast rooms you can rent. Specialty salons like nails, eyebrows and facials are now in these buildings. It’s basically entrepreneurship at an all-time high.”

The Cushman and Wakefield report said that just 4.61 billion square feet of offices will be needed by 2030, thanks to the hybrid work shift, with 330 million square feet of considered excess vacancy. 

But Okada & Co., in a report entitled “From Fear to Fortune,” believes, at least in NYC, the next 12-24 months will present opportunities that could be the most significant in 25 years. Okada reports that in 2021 and 2022, 494 real estate funds raised an estimated $268 billion for North American real estate strategies – a threefold increase in equity compared to the 266 funds that raised $89 billion in 2009 and 2010. But in Okada’s holdings world, Class B office space is their focus. 

“A large Class A is going to be more challenging to fill. But something around 100,000 square feet gives you the opportunity to add flair,” he said. “People don’t want cold and corporate; they want cool and sophisticated.” For example, Okada said little things could make all the difference, like making sure an office kitchenette “has plates and glasses” when you’re showing it. 

As for the future of office space investment, Okada, while optimistic about the future, also warns people to weigh the risk. “We are in an evolution of commercial real estate. We are continually evolving and need to continue to do so. But change is painful,” he said. “The office asset class is the most high risk but also potentially provides the greatest reward because you can buy it cheaply with prices dropping.”