The Future of Dynamic Office and Industrial Design

Chuck Carefoot, Jay Todisco, Geoffrey Kasselman on the Speed of Change Panel

SCOTTSDALE, AZ—“The buildings may be obsolete, but if the bones are good you can open the roof, create windows, and it can become a dynamic building.” So said Chuck Carefoot, VP of construction with Ryan Companies US, Inc., during the “Speed of Change: Designing Office and Industrial Building for the Future” session at NAIOP’s Commercial Real Estate Conference 2016, attended by a record 1,400 commercial real estate professionals. The panel, moderated by Joe Bass, SVP of development for Hillwood, looked at the prospective use of office and industrial buildings.

As always, location is preeminent. “We are seeing reuse of existing buildings in great locations. In many cases, these are obsolete buildings previously classified as Class C in Class A locations,” said panelist Jay Todisco, EVP of Ware Malcomb.

The cost balance between real estate and operations is shifting, also affecting the market. “Real estate costs are now small in comparison to operating costs, so tear-down is justified—there is a lot of margin left,” said Geoffrey Kasselman, executive managing director of the national industrial practice at Newmark Grubb Knight Frank.

Todisco noted that speed-to-market is a fundamental component in this process, with some tenants retrofitting before permits are in place.

The panel indicated an increased demand for automated docks, drone delivery and automation in general. This, in turn, will mean greater power loads.

“This is where infill locations are the better choice,” said Carefoot, “because infill sites have better potential for redundant power.” And a loss of power means a loss of a tremendous amount of money—up to $1 million per minute for some entities, according to the panel.

Labor is still a deciding factor in determining site selection. “But in five to 10 years,” said Kasselman, “this will change. Cobots [collaborative robots], self-driving cars and buses will change the way site selection is viewed. In 10 years, labor will not be a deciding factor.”

Panelists said automated trucking is on the horizon and could reshape the retail and e-commerce models by reducing costs, increasing efficiency and changing the building footprint. “Automated trucking is happening in Europe,” said Kasselman. “It’s a matter of laws and ordinances now, three to four years out. In some towns, conservative decision makers who are not well-versed in the topic of drones are adopting a wait-and-see attitude.”

Automated trucking technology would effectively double the output of the US transportation network at 25 percent of the cost, according to TechCrunch. It’s an $800 billion industry with the average company having three trucks on the road.

Todisco said that while stacked truck courts are difficult to engineer, they are very efficient.

It’s been said many times that industrial is the new retail, “but the lines are irreversible and blurred,” said Kasselman. Online shoppers are increasingly choosing the click-and-collect option to cut shipping costs and expedite delivery. “Last year, 40 percent of online shoppers made at least one click-and-collect transaction,” he added.

The panel then switched gears to speak about the unavoidable and dominant topic of millennials—this broadly grouped generation comprises 53.5 percent of the US work force currently and by 2025 will top 75 percent.

Millennials are not the only generation desiring a collaborative workspace with flexible hours, cultural sensitivity, cutting-edge technology, natural light and a social component, though they may have spawned the current movement. 

This environment requirement is spilling over into industrial space. “Millennials are going to work in industrial, too,” said Todisco. “We are designing with more glass, windows, more space set aside for intensified amenities.”

“Kids who are born today may not even be driving when they are 16. Many millennials don’t own cars,” said Carefoot. “Millennials with families may have one car to share. They may rent a car if they go out of town for the weekend.”

Suburban build-to-suits are taking inspiration from Google and the like, and focusing on employee retention, housing such amenities as biergartens, slides, bocci ball courts, coffee bars and pop-up restaurant spaces. Even the entry space is changing.

“The lobby is not just a place people pass through,” said Todisco. “It’s a place to stop and work, to socialize, so tech has to support that.”

Kasselman said, “Companies are hesitant to make 10-year bets because they are asking, ‘Why do I have to pay rent on this space for seven years when I’m not even using it how I thought I would?’” The panel agreed with the sentiment. That’s how quickly things are changing, how profoundly technology and the demands of the workforce are shaping the use of space.