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Issue XIX
A Quarterly Publication For ITRA Realty Group
Disaster
Rebuilding
or Not?
T
he issue of rebuilding after a
disaster is often charged with
enough emotional sentiment
to cloud more pragmatic fiscal assess-
ments—whether it’s New York’s
“Freedom Tower,” or rebuilding New
Orleans, which will soon face the
next hurricane season.
New York Mayor Bloomberg has Can Corporate Real Estate Meet the
publicly questioned whether rebuild-
ing commercial space around the site Challenge of the New Work Place?
of the former World Trade Center is B Y B A R R Y B E S W I C K
necessary. No prisoner of sentiment, DIRECTOR, CORPORATE REAL ESTATE/CAPITAL ONE
the Mayor is looking at the realities of
T
HE CORNER OFFICE HASN’T QUITE GIVEN WAY TO THE CORNER
a real estate market where condos
command top dollar while Lower
I-POD YET, BUT THE FUTURE OF WORK AS MOST OF US KNOW IT
Manhattan has little need for addi- IS ABOUT TO CHANGE.
tional office space. Based on a study of its own workforce, executive ranks, will seek early badges of
Louisiana officials estimate 75% of Capital One found some interesting personal success such as status confer-
changes in the needs of workers when ring services and amenities. Their priori-
New Orleans’ 213,000 homes may
segmented by generation. ties include child care and elder care.
have to be razed due to flood and
Baby boomers, who now dominate the Gen X places a priority on having such
mold damage.While rebuilding would work force, will be the last generation to tools of information and technology in
be a happy ending for the Big Easy, it work in a traditional office environment. the workplace as high-speed Internet
may be more realistic to fairly com- Companies already are creating 21st cen- and fast computers with the latest soft-
pensate displaced homeowners. To tury work environments that mean less ware apps and strong peripheral sup-
put people in the path of storms commercial real estate space per worker Continued on page 5
stronger than Category 3 (i.e., and arrangements which address
Katrina), before building a better advances in information and technology.
levee system is irresponsible. We envision that the future of work The design of this issue is sponsored
For New York’s Freedom Tower, the will adapt to the needs and values of the X by AsiaPac International, Inc.
same common sense reasoning and Y Generations of workers, which we
The global partnership of ITRA
applies. Many in the city’s real estate found breaks with tradition in many areas.
For instance, the current baby boom Realty Group and AsiaPac Inter-
community doubt that companies national offers complete tenant
generation dominated workforce puts a
will occupy this building because it representation and turnkey real
high value on such material signs of
may be a terrorist target. The alterna- achievement as a dedicated office, close estate services throughout Asia,
tive building occupants are govern- parking space and administrative support. India, Australia and Latin America.
ment agencies—as if that lessens its Boomers want health care and support in
appeal as a target. their “second (post-retirement) life.” Call today to receive unbiased
Perhaps a better starting point for But as boomers exit the workforce, real estate strategies and solu-
both cities is to rebuild without giv- their replacements from Generation X, tions to resolve your global needs.
ing in to the emotion of the moment. who are starting to work their way up the
Issue XIX Real EstateStrategies 1
Long Leases: A Lawyer’s Reflections
B Y S C O T T H . M I L L E R
R ECENTLY I GOT A CALL FROM A POTENTIAL CLIENT WHO WAS NEGOTIAT-
ING THE BUSINESS TERMS FOR A DOWNTOWN OFFICE LEASE WITH A LAND-
LORD. HE WOULD LEASE A SMALL SPACE IN A LARGE BUILDING FOR TWO
OR THREE YEARS.
The deal was as simple as they come. Ownership of Real Estate is Often
And yet the landlord’s lease documenta- Complex. The ownership structure for
tion was hefty enough to measure in larger office buildings has become more
pounds. The caller wanted to know: layered and complex. Real estate com-
Could I help? petes with other businesses for invest-
That’s a great question and I still ment dollars, creating greater stress for
don’t really know the answer. The nego- leases to produce ascertainable returns.
tiating leverage of the tenant was zero, The lease is expected to act like a bond
so there was not much I could do at the with a fixed return and all contingent risks
bargaining table. I could read the docu- and expenses pushed onto the tenant.
ments and explain to my client, who got to the point quickly when drafting a
Decision-Making Can Be Difficult.
knew little about leases, as much as he document. By contrast, word processing
When ownership of real estate is simple,
could tolerate about what he was in for. encourages increasing amounts of boil-
the owner can more easily decide how
And charge him for that crash course in erplate, because it does not require a
long and one-sided to make the lease
onerous lease documents. Not very sat- decision to accept a risk.
form and make quicker decisions during
isfying, though my malpractice carrier
lease negotiations. In a more institutional Job Mobility. People are more mobile
might approve.
ownership structure, it tends to be more and stay in their jobs for a shorter peri-
Does the lease need to be that long?
difficult to obtain clear-cut decisions that od of time. Since a lease is a relationship
Why are leases so much longer now than
deviate from a very risk-averse approach. over years, everyone now has to assume
they were years ago? Why are leases gen-
that the same people will not be around
erally so one-sided? After almost twenty- The Pace of Business Has Accelerated.
to settle the inevitable issues and the
five years as a lawyer, most of them in Service businesses,specifically those that
document is asked to address more.
commercial real estate, I know that it is tend to use office space, have grown
fairly easy to write a comprehensive enormously. Also, the pace of business The Defensive Practice of Law. Law,
lease that few tenants with significant transactions has increased. Businesses like medicine, is practiced more defen-
assets will sign without protracted nego- also expand, merge, contract, or die at a sively these days. Remember all those
tiation. Here are a few reflections on the greater rate than in the past.Tenants are expensive tests for your headache? Well,
rapidly evolving world of increasingly driven to have flexibility in their long- how about all those expensive docu-
complicated office leases. term space commitments and to quanti- ments with literally hundreds of issues
There are many forces at work in fy their total monetary lease obligations and sub-issues? Only the lawyers under-
commercial leasing that contribute to to facilitate planning and budgeting. stand them comprehensively. If only the
long one-sided documents and the lawyers thoroughly understand the doc-
Real Estate Has Its Own Pace. Real
resulting negotiations and legal bills. uments, and they (the lawyers and docu-
estate tends not to move as fast as the
The lease is the meeting ground for ments) are too downside-oriented to
internet. Owners and tenants have to
today’s rapid pace of business and a begin with, it is difficult to break the log-
try and project years in advance when
landlord/tenant relationship that will jam? The above factors do not preclude
they commit to a lease. The flexibility
last for years. No landlords or tenants briefer leases or efficient negotiations.
and certainty sought by each party can
want long documents or protracted Current business environment puts a
result in the negotiation many issues.
negotiations, but very few will readily premium on the importance of (1) pay-
give up what they perceive they need. Inherent Unknowns. Commercial ing attention to the fit between the ten-
In the case of tenants, the need often real estate has inherent unknowns. It is ant and the landlord, and not just the ten-
includes better information to assess the extremely sensitive to the economy, and ant and the premises, (2) owners making
likelihood of future maintenance, capital an expanding list of legal requirements clear strategic decisions when preparing
improvement, operation and tax increas- (ADA, asbestos, seismic, sprinklering) their lease forms, and (3) tenant attor-
es due to building transfers. and it is often hard to predict what will neys understanding the lease deal and
be next. A lease is about a future rela- their client’s business so they can pro-
Real Estate is a Big Business. Many
tionship. No matter how many contin- vide quality risk/benefit analysis with
years ago there were not that many large
gencies one tries to anticipate, the respect to various lease issues.
buildings and real estate was not as big
future tends to provide others.
of a business. Real estate ownership Scott Miller is a San Francisco-based
tended to be simpler. Now real estate Technology. Technology plays a role real estate attorney. His e-mail is:
has a place in all institutional portfolios. too. When carbon paper was king, you shm@lrolaw.com
2 Real EstateStrategies Issue XIX
North American Office Market Survey—Second Quarter 2006
TOTAL AVAILABLE AVERAGE
CITY VA C A N C Y
SQUARE FEET SPACE RENT
1 Atlanta 126.4M 19.2% 26.5M $20.20
2 Austin 34M 15.7% 5.3M $21.20
3 Baltimore 79.1M 13.0% 10.3M $21.75
4 Boston 208M 14.3% 29.8M $27.40
5 Calgary 42.4M 1.8% 14.5M $44.00
6 Charlotte 33.9M 19.8% 6.7M $28.95
7 Chicago 277M 19.0% 52.5M $24.00
8 Dallas 178.2M 21.7% 41.5M $18.04
9 Denver/Boulder 138.7M 15.0% 20.7M $17.70
10 Fairfield/Westchester 108M 14.0% 15.1M $15.87
11 Ft. Lauderdale 53.1M 9.0% 4.8M $23.90
12 Houston 183M 15.3% 28M $18.07
13 Las Vegas 38.1M 8.4% 3.2M $26.04
14 Long Island 84M 10.0% 8.4M $25.81
15 Los Angeles 305M 9.7% 37.4M $25.38
16 Manhattan 500.1M 9.6% 48.5M $44.50
17 Miami 54M 8.4% 4.5M $25.06
18 Nashville 27.4M 10.7% 2.9M $16.67
19 New Jersey 298.1M 13.1% 39.0M $25.10
20 Norfolk 19.8M 8.9% 1.8M $18.22
21 Orlando 68M 8.5% 5.8M $25.13
22 Palm Beach 32M 9.9% 31.7M $25.88
23 Philadelphia 87.0M 15.0% 13.0M $24.34
24 Phoenix 92.4M 13.0% 11.9M $23.37
25 Pittsburgh 84.2M 16.2% 15.3M $18.59
26 Portland 53.7M 12.0% 6.5M $18.74
27 Salt Lake City 26M 8.9% 2.3M $18.22
28 San Diego 67M 9.8% 6.6M $30.15
29 San Francisco 77.4M 11.7% 9.0M $29.41
30 Seattle 118M 11.3% 13.3M $23.01
31 Silicon Valley 77.7M 15.9% 12.4M $19.67
32 St. Louis 73M 11.9% 8.7M $18.68
33 Tampa 37.2M 9.8% 3.6M $19.68
34 Tucson 11.9M 12.0% 1.4M $17.95
35 Washington, D.C. Metro 395.7M 9.2% 36M D.C.: $42.36
Metro: $31.13
London Office Market Survey—Second Quarter 2006
DISTRICTS TAKE UP VACANCY TOTAL EST. STOCK PRIME RENT
36 London (WE) CBD 775K 4.2% 105M 82.5 GBP
37 City/Docklands 1.5M 9.3% / 9.4% 108M 52.5 / 37.5 GBP
Definitions for London
“Take Up”—Space absorbed in the previous quarter | “Supply”—Available Space | “GBP”—British Pounds
Disclaimer:This survey contains information from sources deemed to be reliable and accurate. However, we make no representation, warranty, or guaranty of its accuracy.
Issue XIX Real EstateStrategies 3
Asia/Pacific Rim Office Market Survey—Second Quarter 2006
TOTAL AVAILABLE AVERAGE
CITY/COUNTRY VA C A N C Y I N %
SQUARE FEET SPACE RENT
38 Bangalore, India 13,000,000 4.90% 637,000 $14.30
39 Hyderabad, India 5,100,000 5.00% 255,000 $8.04
40 Chennai, India 5,000,000 6.00% 300,000 $11.40
41 Pune, India 6,750,000 6.00% 405,000 $12.40
42 Delhi, India 7,863,000 4.00% 314,520 $34.02
43 Mumbai, India 8,866,000 5.00% 443,300 $43.99
44 Beijing, China 39,043,000 20.60% 8,042,858 $27.35
45 Hong Kong, China 62,417,143 5.71% 3,564,019 $59.00
46 Shanghai, China 35,646,000 5.00% 1,782,300 $32.60
47 Tokyo, Japan 646,525,000 5.00% 32,326,250 $86.00
48 Seoul, S. Korea 210,000,000 0.95% 1,995,000 $62.15
49 Singapore 45,779,000 12.70% 5,813,933 $27.04
50 Hanoi, Vietnam 2,263,850 4.00% 90,554 $35.00
51 Ho Chi Minh City, Vietnam 1,968,565 5.25% 103,350 $30.10
52 Brisbane, Australia 18,300,000 1.10% 201,300 $28.12
53 Melbourne, Australia 37,221,000 7.50% 2,791,575 $19.07
54 Sydney, Australia 49,061,000 10.10% 4,955,161 $32.70
Central-Latin American Office Market Survey—Second Quarter 2006
TOTAL AVAILABLE AVERAGE
CITY/COUNTRY VA C A N C Y I N %
SQUARE FEET SPACE RENT
55 Buenos Aires, Argentina 8,802,241 7.60% 668,970 $14.00
56 Caracas, Venezuela 5,920,000 16.00% 947,200 $15.45
57 Lima, Peru 3,500,000 14.00% 490,000 $11.05
58 Mexico City, Mexico 109,260,000 15.85% 17,317,710 $25.25
59 Monterrey, Mexico 8,107,000 11.20% 907,984 $17.87
60 Sao Paulo, Brazil 53,657,017 16.00% 8,585,123 $30.25
61 Curitiba, Brazil 18,380,000 17.00% 3,124,600 $22.50
62 San Juan, Puerto Rico 9,200,000 18.47% 1,699,240 $27.50
63 Santo Domingo, Dom. Rep. 3,200,000 3.70% 118,400 $22.00
Disclaimer: This survey contains information from sources deemed to be reliable and accurate. However, we make no representation, warranty, or guaranty of its accuracy.
4 Real EstateStrategies Issue XIX
New Work Place Challenge
Internet users telecommuters, almost as much as it is a
Continued from page 1
• 36% have high speed Internet access central corporate center. Capital One
port. To many from this group, cutting • 87% of Federal workers are interest- projects that in the future, 40% of knowl-
edge technology may trump the corner ed in telework edge workers will telecommute.
office or more personal space when • Average time spent in traffic queues Already a growing group of compa-
making career decisions. commuting per week: nies are carrying out economies by mov-
Even less concerned about the old • Los Angeles - 11.25 hours ing to the distributed work model. Sun,
material issues of space and private • Washington - 7.25 hours BP, Blue Cross-Blue Shield Association,
offices is Generation Y, a group that will • Minneapolis - 6.6 hours Boeing and Cisco Systems implemented
enter the workforce en mass in the The Capital One study results, based huge productivity increases ranging
next decade. on a two-week observation period, show from 9% to 54%. AT&T reported $135
Anyone who has observed a college that more than 40% of all office seats million in productivity savings by sup-
class will not be surprised by Y group’s were vacant every day, while an addi- porting distributed work.
need for warp speed technology. Forget tional 30% of all seats were unoccupied Distributed work meets the needs of
e-mails. It is hard to tell if a single soul is during the day. Thus 74% of our workers knowledge workers, who are happier
actually listening to the professor as a practiced work mobility before we put with the new found connectivity offered
roomful of tomorrow’s executives is tap- any workspace initiatives. by technology and the flexibility that
ping into notebooks—arranging social The greater demands of family, longer allows them greater control and greater
dates, commenting on the professor’s working hours combined with increas- time over their personal lives.
hair, or playing high speed games using ingly longer times spent going to work Consider that we face a looming tal-
wireless connections or the university’s are putting new pressures on the average ent shortage:
intranet, if they are not text messaging knowledge worker who is finding that • 15% of 25-44 age workforce exiting
with cell phones. This Y generation they have dramatically less time for in the next 15 years
multi-tasks from the cradle, and has themselves. For example, the length of • 10 million workers needed by 2008
quickly evolving tastes, a strong sense of the work week rose from 42 to 47 hours • 2 workers exiting workforce for
community and individual expression. between 1977 and 2002. every one entering; demand for
The conclusions of this research With the demand for more knowledge skilled talent expected to grow annu-
leave little doubt that the company workers to enter the workforce expect- ally through 2020
office will be undergoing the most his- ed to be at a premium for the next 15 By understanding and leveraging the
toric changes since the PC was intro- years, the forces of societal pressures, changing needs of different generations
duced 25 years ago. high-speed technology and information in the workforce, companies can adapt,
We also found some interesting processing and corporate cost structures making it easier to attract and keep tal-
trends in how individuals use their are coming together to create a 21st cen- ent, while creating a cutting-edge work
offices to perform work. For example, tury office prototype. We will be seeing environment that meets the needs of
some people may spend almost as much an office that will be a central nexus for the X and Y Generation workers.
time sitting in rush hour traffic getting
to the office in some cities as they actu-
ally spend sitting at their own desks. ITRA Grows in Florida and Texas
D
Driven by the forces of technology R. RONALD POLLINA, CHAIRMAN, ITRA REALTY GROUP, ANNOUNCED THREE NEW
which are mobilizing the nature of US OFFICES.“WE ARE PLEASED THAT ITRA’S PRESENCE IN TWO LARGE AND FAST-
knowledge work, the competitive need GROWING STATES IN AMERICA HAS EXPANDED, EVEN AS WE CONTINUE TO GROW
ACROSS THE GLOBE.” THE NEW OFFICES ARE:
to increase productivity and raise com-
mercial real estate utilization, Capital • ITRA/Cooke, Swaney & Cooke will serve newspaper, CVS Pharmacy, Consolidated
the Dallas/Ft.Worth market. Headed by Container and American Hotel Register.
One has developed a Future of Work
Lissa Cooke, President, who holds both The firm is located at: 2180 N. Park
Strategy (FOW) to better understand
CCIM and CPM professional designations, Avenue, Suite 220, Winter Park, FL USA
and leverage the changing realities of
the firm has provided exclusive tenant 32789, telephone: 1.407.622.2558,
the new workplace. e-mail: jyork@itrarealtygroup.com
representation to such companies as GHA
The centerpiece of this FOW strategy • ITRA/Stagman Commercial Real Estate
Architects, UPS, Union Drilling, Weitz &
is the concept of distributed work, mean- Advisors of Fort Lauderdale, FL has
Luxenberg, P .C., Hostnet, and Henslee,
ing that work is more tied to information, Fowler, Hepworth & Schwartz. The firm joined ITRA under the leadership of
which, like the Internet is not tied to a is located at 6024 Palo Pinto Avenue,Suite Jason Stagman, CCIM, President.Tenants
specific physical location. Thus flexible 100, Dallas,Texas, USA 75206, telephone, represented include: John Casablancas
arrangements such as telecommuting, 1+214.521.3772, e-mail: Modeling and Career Center, Indepen-
which do not tie a worker to an office lcooke@itrarealtygroup.com dence Community Bank, Bankers Life &
will redefine the traditional workplace • ITRA/York Property Company has Casualty Co., and Tax Automation Inc.
while greatly increasing productivity. served the Orlando market/Central The firm is located at: 6401 Congress
Here are some facts about the US Florida for 22 years. Headed by Jeffrey Avenue, Suite 140, Boca Raton, Florida,
working population in 2005: York, President, the firm represents USA 33487, 1+800.489.7710, e-mail:
• 68.5% of the population are such clients as the Orlando Sentinel jstagman@itrarealtygroup.com
Issue XIX Real EstateStrategies 5
Board of Directors Committee Chairs
Ronald R.Pollina, PhD, ITRA Chicago, Chairman Ross Selinger, ITRA Long Island, ITRA Newsletter Committee Chair
Ross Selinger, ITRA Long Island, Vice Chairman Will Gary, ITRA Denver, Web Site Committee Chair
Debra Stracke Anderson, CCIM, SIOR, ITRA Washington DC, Secretary Carrie Holstead, ITRA Pittsburgh, Business Development Committee Chair
Anna Rosen, ITRA San Francisco, Treasurer Norm DeHart, ITRA Boulder, Conference Committee Chair
Stuart Holcombe, CCIM, ITRA Atlanta, Membership Advisory Larry Dickstein, ITRA New Jersey, Membership Committee Chair
Issue XIX
A Quarterly Publication For ITRA Realty Group
Chicago-O’Hare Building
401 Devon Avenue
Park Ridge, IL USA 60068
phone +1 (706) 654-3201
US and Canada +1 (888) 925-4872
itra@itrarealtygroup.com
www.itrarealtygroup.com
ITRA Realty Group provides corporate
real estate services for tenants and
buyers throughout the world.
