Job Growth Brings Office Trade Uptick
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IRVINE, CA—The main reason Auction.com facilitated the closing of so many office deals in June is because full-time white-collar office jobs are on the rise, the firm’s EVP Rick Sharga tells GlobeSt.com. This is a positive indicator for the economy, he adds.
As GlobeSt.com reported last week, Auction.com racked up an impressive $121 million in online real estate auction sales during the month of June. The marketplace reports closing 42 commercial assets last month, ending the first half of the year strongly.
Most of the sales in June came from office properties. Data from the Metro Economy and Property Ratings for Summer 2014 from Auction.com Research points to recovery within that sector, which faced a steep decline during the recession. Total office employment is up 2.4% over the past year, a contributing factor to the office-property vacancy and rent improvements seen in past quarters and a likely cause of the heightened office-property transactions noted in this month’s report.
Of course, the creative-office trend has been a shot in the arm for the office market, particularly in the redevelopment arena. “Part of it is being done out of necessity,” says Sharga. “Buyers and businesses who are looking for office space are really demanding more-flexible office environments and looking for ways to reduce square footage on a per-employee basis.”
In terms of how the creative-office trend is impacting office trades, Sharga says, “on the one hand, you’re going to see lower square footage perhaps because developers and business owners are finding ways to fit more people into a defined space. On the other hand, the more flexible and technology advanced you make a space, the more you can trade it for. Landlords are able to capture maximum revenue by adding creative office.”
But Sharga points out the underlying reason for the increase in office trades is that we are finally seeing job growth in the right sectors. “For the first time in this recovery, we’re seeing the kind of job growth that dictates new office leases, bigger spaces and more full-time white-collar office jobs. In the recent past, it was really part-time and temp positions, and businesses weren’t going to get new or bigger spaces if they weren’t bringing up the headcount.”
In some markets, such as Northern California, square-footage prices are going through the roof, says Sharga, so tenants are looking for creative ways to maximize the use of whatever space they have to rent out. “The kind of build-outs we’re seeing there are a model for other markets as they’re proven successful. But fundamentally, we’re seeing more office trades because we’re seeing more office workers.”
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