Is Worker Mobility Driving Change
in the Office Sector — Yet?


Ken Robertson

The office is not the only environment experiencing a digital-age revolution. Now your commute is going to go all 21st century (sorry, no flying cars — yet). Because of the increasing trend of employees working from home — as well as in coffee shops, airports, hotels and other locations — many corporate home bases are allocating fewer square feet per employee in the office.

Another related trend: autonomous vehicles (AVs) are going to be the next big disrupter, which means both challenges and opportunities for office buildings and, in particular, parking structures.

When is this all going to happen exactly?

CBRE conducted a survey of approximately 200 commercial real estate professionals with CBRE Advisory & Transaction Services, CBRE Global Investors and Trammell Crow Company across the largest U.S. and Canadian office markets.

Here are the key takeaways from their findings:

…the majority of U.S. and Canadian workers still commute by car, which means that parking facilities are still going to be a thing.

Despite all this talk of the future, the majority of U.S. and Canadian workers still commute by car, which means that parking facilities are still going to be a thing. On-demand transit options (think Uber, Lyft, and Citi Bike) are gaining speed in dense urban environments, but 86% of employees in the United States and 79% in Canada still drive their own cars to work, especially in the sprawling suburbs and in areas with less-extensive mass-transit systems.

In the Dallas/Fort Worth and Houston metro areas in 2016, more than 90 percent of workers commuted in a vehicle. In fact, more than 80 percent commuted alone in a vehicle.

The percentage of people working at home has been slowly ticking up in every major U.S. market, but ultimately that percentage is still relatively low: 4.6 percent of workers nationally in 2016. What that means: the need for parking remains strong.

Despite this status quo, technology is still creating an atmosphere of uncertainty in the office sector, especially when it comes to parking requirements in suburban locations and employees with unpredictable schedules.

Office building owners are incorporating pick up and drop off zones and offering rideshare credit programs to tenants. This is in response to a new world of transportation and technology. These zones are designed to help owners “future proof” their buildings for the coming of AVs. Even though this phenom is not expected to go mainstream for at least a decade, many developers are still not including the trend in their planning or building structures that can be converted to alternative uses. The reason: increased costs.

When will this all become standard and mainstream? When convertible parking structures become a “given” in developments. This will happen when AVs become prevalent during investors’ hold periods.

Although the privately-owned car still dominates the scene (for now), on-demand transportation services — including shared and single-occupant vehicles — as well as bikes and scooters, are impacting transit patterns and rider preferences. The pickup/drop-off zones mentioned above are an attempt to introduce employees and visitors to the usage of these soon-to-be-mainstream services.

Interestingly, parking ratios for new buildings have actually been decreasing for most of the largest office markets since the 1990s. The only market with an increase in parking ratio since 2000 is Orange County. This location also shows very little public-transit usage, compared with many of the other markets studied. Orange County also holds the highest parking ratio for newly constructed office buildings since 2010, at 4.5 per 1,000 square feet.

Markets where the parking ratios have greatly decreased tend to be more urban and transit-oriented: San Francisco, Chicago, Boston, Washington, D.C. and Seattle. Public transit usage has actually increased in these markets in recent years.

An attitude whose time has come: the demand for working close to home, or at least reducing the hell out of your commute. CBRE’s survey echoes the growing cry for a humane trip to work. More than 86% of respondents cited “proximity to workforce” as an important determinant when considering a suburban market. This means that “ease of commute” is a huge factor, as well as proximity to major highways (76.8% of respondents), once again reflecting the need to streamline employees’ commutes.

Parking ratios and parking costs also were viewed as important factors by occupiers when deciding where to locate in suburban markets.

Parking ratios and parking costs also were viewed as important factors by occupiers (cited by 55.5% and 41.7%, respectively) when deciding where to locate in suburban markets.

How do survey respondents themselves see the future? Nearly 75 percent of them say that overall office demand for parking will either increase or stay about the same by 2023. Of course, when it comes to urban vs. suburban locations, the opinions tend to differ. Central Business District (CBD) parking are seen by 87 percent of respondents as likely to stay the same or decrease; for suburban parking, 81 percent say that office parking ratios are likely to stay the same or increase.

When considering parking pricing, 76 percent of respondents anticipate that CBD parking will rise in the next five years; only 43 percent say that  suburban parking prices are expected to rise.

Then you have the markets that are hybrids. Greater Atlanta, for instance, is an example of a traditionally suburban market that is urbanizing. That means light rail, which is a favorite of the Millennial workforce. Developers are focused on sites that are no more than a five-minute walk from a MARTA rail station, particularly for large Class A office projects. Parking ratios for these types of transit-oriented office buildings can be 15% to 20% lower than for similar developments without proximity to rail.

So, what about those automated vehicles? They’re coming, right? Automobile manufacturers and tech companies are seeing to it. That trend is certainly getting the attention of the office sector and the real estate industry. However, nearly 60 percent of CBRE survey respondents think that it is unlikely that AVs will be commonplace in the next five years.

Like everything else in life, time will tell.

 

Is Worker Mobility Driving Change<BR><noscript><img class=
Ken Robertson oversees a team responsible for all acquisition, disposition, and asset management activities for his region on behalf of KBS REIT, pension fund and sovereign wealth fund clients. His portfolio consists of 32 assets containing 12M SF.