The Massachusetts office market is offering up some appetizing investment opportunities for forward thinking investors. Where are they and how can investors reel in the maximum returns on office leasing?
Why Office Leasing in MA?
With so much competition for both multifamily properties and distressed single family rentals which has pushed many into overpaying for poor returns, investors are being forced into hunting for alternative vehicles.
With fewer competitors and more inventory likely on the way office buildings are becoming increasingly appetizing for those looking for higher yields and more room for capital growth. While this inventory may not all be listed on the market yet, tech and commercial real estate consulting firm RealComm suggests many corporate property owners are sitting on far more space than they need. As this space is shed over the next 5-7 years transaction volume and an improving market will continue to drive up property values.
However, the CCIM Institute’s recent research highlights that many of the best investment opportunities and cap rates are to be found outside of the nation’s largest metro areas. Instead think areas like Worcester, Shrewsbury and Auburn, MA.
Emerging Office Trends
Technology continues to be the main driving force which is changing corporate America and the future of office leasing. New England investors who recognize this and the emerging trends which are forming a new generation of workplaces will be those who are best positioned to reap the maximum commercial real estate returns.
The recently published Collaboration 2020 study highlights that while cost continues to be a major factor in deciding on office space, productivity and innovation are also top concerns and an area which holds opportunities.
The Workplace of the Future survey indicates one major way this is changing the workplace is 77% of companies reporting that they are already utilizing more open floor plan spaces and collaborative spaces.
This survey also revealed 46% of companies quizzed are already employing cloud computing and are spreading workers out versus huddling them all in one location. This is a trend which is being forced out of necessity, not only to keep overhead down but to retain better talent and ensure business continuity during disaster times.
Going one step further, the hottest emerging trend in office leasing is now shared coworking spaces.
Cashing in on a New Trend in Office Leasing
There are many advantages of operating a shared office leasing set up compared to the old way of doing business.
Those who have experimented with these models in California and Florida have found them hugely popular and profitable. Venture X a coworking space for startups and independent entrepreneurs in Naples, FL boasts 20 to 40 different companies utilizing its space as tenants, while neighboring prime retail and class A office spaces remain empty. This offers great diversity for landlords, resulting in consistency in cash flow and much high income potential from a single space.
Simultaneously, this type of office leasing affords higher net profit due to reduced cost of build outs and tenant turnover and replacement, though retaining a full service property management company to handle bookkeeping, building maintenance and office leasing is still essential.
Will you be one of those forward thinking commercial real estate investors who cashes in on this opportunity and best returns?