Burbs Are Not Dead


by Ken Robertson

All eyes are on the Millennials. As the largest generation in history behind the Boomers, this cohort has a tremendous amount of influence, and knowing where and how they are going to live is invaluable to future business strategies. So the big question is: urban or suburban?

New research suggest that Millennials actually favor suburban living over urban, and in fact, 54% currently reside in the ‘burbs with an additional 9% who would like to. But why suburbia when Millennials are characterized by socialization, hyper-connectivity, collaboration and engagement? The answer is simple. Millennials also possess a strong sense of social responsibility and are moving to smaller cities that can be revitalized into vibrant and sustainable live, work, and play hubs. Welcome to the “new” suburbs.

In response, office building owners are redefining suburban properties to appeal to tenants and their 20- and 30-something employees through offerings that help balance professional and personal lives.  The goal is to make the workplace more than just a workplace. Millennials want a lifestyle.

Employee retention is a major concern for employers, and in today’s market it definitely pays off to be the “all-inclusive” building in town because tenants are willing to shell out more for the right space—even if the location isn’t quite perfect. Decreasing unemployment rates and increasing wages mean that employers are paying about 15 percent more to replace an employee—an expense that quickly adds up. Attractive work, live and play locations could possibility increase employee satisfaction and retention, and ultimately lead to increased leasing activity.

What tenants are looking for in a building in the “new” suburbs:

  • Amenities—On-site or proximate to high-end amenities such as fitness centers, restaurants and relaxation lounges.
  • Accessibility—Easy navigation around a building, proximity to airports, major thoroughfares, schools and employee homes.
  • Transportation— Buildings near mass transit can to command premium rents over their less connected competitors.
  • Affordability—Affordable neighborhoods with low-cost of living.
  • Flex space–Agility and collaboration within a space that allows a tenant to diversify using breakout rooms and flex walls to enhance productivity.

Overall, suburban properties seem to be a good bet, and according to U.S. office NCREIF total returns for suburban office was less than two percent below its CBD counterparts.  CBRE Research identified the top five suburban markets as Houston, Dallas-Fort-Worth, San Jose, Phoenix, and Los Angeles. However, other cities are likely to perform just as well if they have the right offerings.

The concept of thriving suburban office hubs isn’t new. Generations before the Millennials preferred the suburbs. But what is different is the sheer volume of the Millennials. At 70-million-plus strong, the Millennials are heading your way and employers are following suit. Be ready to rise above the competition with the ultimate live, work and play environment.

 

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Ken Robertson is the Central Regional President for KBS, overseeing over 12 million square feet.