Colorado-Real-Estate-Journal_332573

Page 10 — Office & Industrial Quarterly — March 2023 www.crej.com OFFICE — TENANTS W riting an article on sus- tainability in office space in Colorado always feels very “crunchy,” until you start to look across the globe at what is inspiring both occupiers and investors. Larry Fink, chairman and CEO of Black- Rock, emphasized in his 2022 let- ter to chief executive officers sev- eral themes, among which are the future of work and sustainability. As the Securities and Exchange Commission requirements change for public companies and the work- force continues to evolve, sustain- ability has become an economic argument rather than an experi- mental concept. From an office standpoint, we continue to see that companies are driving changes, forming a symbiotic relationship with investors and owners to drive the future of office. There are two main factors that companies are looking at when considering change in commercial real estate. The first is the recruit- ment and retention of talent. The future workforce is more focused than ever on sustainability as workers are looking at companies where they want to be employed; in reali ty, they are looking at how companies adapt for the future. The younger workforce wants to work for companies that are embracing change and holistically evaluating where the workforce comes to work every day. Another factor that goes into the demands of the workforce is that the environment where employees come to work is competing with their homes, and it needs to be worth the com- mute to wherever the office is. As a result of these changing attitudes, compa- nies are demand- ing amenities that are more often seen in new build- ings. Buildings built in the last decade can offer increased sunlight, better air quality (including more fresh air circulation) and outdoor space. Going a step beyond this, tenants are also asking landlords about their energy plans, and how they are looking at waste in the buildings. This all is shown in the data as properties built between 2020 and 2022 average nearly 10% lower availability than offices built between 2008 and 2010 did during the last cycle. Since the pandemic, the focus on wellness has also become a part of sustainability practices as the health of workforce has been high- lighted daily. The younger work- force is demanding more metrics around sustainability; it has become a branding and corporate risk to companies that cannot report on what they are doing to meet th eir goals. For all these reasons, high- quality spaces are showing much more resiliency in the current office leasing conditions. For example, in the U.S., occupancy of new offices has remained steady for over a year (peaking at 16.6% vacancy in fourth- quarter 2021) even with new stock being built. Meanwhile, older build- ings have been thinning out, with a pre-pandemic vacancy of 13.5% rising to 19% in third-quarter 2022. This trend is expected to continue and become more pronounced. This leads into the second main driver of why companies are look- ing at sustainability in their real estate. Becoming more responsible from an ESG perspective is a true economic demand from their cus- tomers and can impact the bot- tom line. Some 40% of all carbon emissions globally are estimated to come from the real estate industry, and so it makes complete sense this is where companies start when evaluating their carbon footprint. No longer is green initiative lan- guage optional when many large companies are evaluating their leases – although it remains to be seen if buildings can adapt to the changing headwinds of what com- Occupiers, landlords: Adapt or become irrelevant Janessa Biller Vice president, tenant representation, JLL JLL Research Note: Availability rates differ from vacancy rates by removing leased space that has yet to be occupied from available inventory. Please see Biller, Page 14 INTERIOR ARCHITECTURE acquilano.com 303.893.5355 acquilano.com / 303.893.5355 Women-owned and Denver-based, Acquilano has a 36 year history of transforming space into dynamic environments where people prefer to be. We are ready to listen, share our insights, and to devise customized solutions for this rapidly changing work environment.