Philly's CRE Community Takes Stock of Changing Trends

 (Missed RealShare Philadelphia? Connect with conference attendees anyway and watch and listen to sessions and more at RealShare Connect.) 

PHILADELPHIA-Fittingly, on the day when the tech community awaits with baited breath the unveiling of Apple’s iPad3, panelists at RealShare Philadelphia kicked off the half-day event with talk of how technology--including the iPad--is changing commercial real estate in ways both pleasant (“I can give a virtual tour of any building from my iPad,” David Binswanger, president of Binswanger, said) and unpleasant (“showrooming,” where consumers visit a store for a demo and then buy the same product online, has become a fact of life for retailers, according to Lance Billingsley, director of anchor tenant leasing at Federal Realty Investment Trust).

Technology, in short, is changing many aspects of Philadelphia’s commercial real estate space, was the consensus opinion among experts at the one-day conference, which drew nearly 500 industry attendees. So, too, however, are other less apparent and less sexy developments as well. 

Workforce trends, such as the ability to work remotely sometimes for days at a time is having a clear impact on space usage, said H. Hetherington Smith, senior vice president and branch manager for Studley. How much of an impact? It is a greater concern or issue for her clients than, say, the forthcoming lease accounting changes that will require companies to account for their leases on the balance sheets.

“The bigger trend is the need to maximize space,” says Smith. “The average cost per seat per year for a typical company is $10,000.” When that company actually figures out how often, or not, the space is used on a continual, day-to-day basis, the reaction is to scale back, she said.

“I had a client tell me once that no one needs to come to work anymore,” said Ron Cariola, managing director, lead broker for Jones Lang LaSalle in the Philadelphia market. That is not a happy turn of events for office tenants, however. “Companies want to create work environments where people want to come to work,” Cariola said.

Granted, that doesn’t mean firms are not maximizing space, he concedes. However, they still expect certain amenities from the building’s design and infrastructure. Space that supports the collaborative nature of most businesses now, said Paul Garvey, senior director of Cushman & Wakefield’s brokerage services group, is particularly essential.

It is this back-and-forth between workforce needs and building amenities that are skewing previously solid market indicators, such as the impact employment growth has on office space projections. The paradigm where it was automatically understood what a 1% increase in the employment rate meant for office absorption is over, Cariola said. “There are other considerations to factor in now.”

Technology is one of those factors. Internet kiosks in stores to place orders is a help to retailers that find themselves out of a particular item and faced with a frustrated customer, Billingsley said. At the other end of the supply chain, companies are finding distribution and warehousing more efficient thanks to supply chain technologies and processes, reported Binswanger, who added that one of his clients, Wal-Mart, is coming out with huge requirements in this area, in response to the improving economy.

“The Philadelphia market is doing its best to embrace change by focusing on this speed to market in all aspects,” Garvey said. It is now possible to deliver a 300,000-square-foot building in 24 months thanks to zoning process improvements, he said, as one example. However, he added, the Philadelphia market and its surrounding environs and related industries need to make further improvements if the city and region is to remain competitive. “There is reason Foxcomm manufacturers the iPad outside of the US--it is able to get it to market faster,” he said.