WASHINGTON, DC—It is little secret that there is a problem with suburban office product, especially buildings located in corporate parks or campuses. Any landlord that owns a building in such a setting knows it's a problem, says Sandy Paul, managing director of National Market Research at Newmark Grubb Knight Frank. What such landlords don't realize, at least in the aggregate, is how widespread the problem is – how many office buildings that are, to put it starkly, obsolete with little chance of repositioning or revitalization.

Paul and his colleague Bethany Schneider, senior research analyst at NGKF, put a number on it in a report the firm is about to release.

Fourteen percent to 22% of US suburban office inventory is obsolete. That translates into 600 million to one billion square feet across 50 of the largest metro areas in the US.

It also translates into 7.5% of the entire US office inventory, although Paul tells GlobeSt.com that that percentage is probably too low. The firm limited its study to suburban areas, but undoubtedly there is obsolete office product in urban areas as well.

To be clear, NGKF is talking about office product that has little chance of being leased out. There are surely exceptions—and office building in the suburbs that is leased out by a company or companies that don't mind driving to work and are fine with the limited amenities available.

These offices, however, are not buildings that could be repositioned with a multi million dollar makeover because they have a redeeming quality, such as being located close to transit. The nation's stock of such offices is much larger, Paul said. "There is a much higher fraction of buildings that require renovation but are not obsolete. That is not what this study is about."

There are six qualities that doom a building to obsolescence, according to NGKF:

Location, as determined by proximity to public transit and/or highway access
In-building amenities, such as on-premises food service, fitness centers, and conference centers
Parking ratio
Age of the property, based on year built or renovated
Size of the building
Size of the floor plate

That said, tenants demands vary from market to market, with some areas placing more emphasis on certain qualities. For example, in Santa Clara, Calif., one of the markets studied in the report because of its high number of obsolete buildings, building size has a great effect on vacancy and asking rents. The 36 properties that were 75,000 to 200,000 square feet -- considered the ideal there -- had a vacancy rate of only 2.4%, a full 7.2 percentage points below the submarket average.

The big thing in the O'Hare submarket, which is located northwest of Chicago, is having a "Chicago" address. Properties that are in the O'Hare submarket but have a Chicago address, the average vacancy rate registered 14.8% – a full 6.7 percentage points lower than the overall submarket average.

The report concludes with suggestions for both landlords and tenants. Tenants, especially those that don't mind a suburban location, can basically write their own ticket, or lease rather.

Landlords are at a disadvantage, of course, but they do have options as well. There is always the possibility of repurposing the building to a new use. Or, if there is a business case to invest in some of the "curable" obsolete qualities of the building such as its amenities or parking facilities, they might want to do so if the local market puts an emphasis on that particular feature.

Now's the time to try at least. NGKF is predicting an overall office tightening in coming years with a peak US landlord market in 2017- 2018. That includes suburban markets too.

Instant Insights /

Brace Yourself Landlords: There are More Obsolete Offices Than You Realize

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