The Pacific Northwest region of the United States has long been known for its natural beauty, strong technology and manufacturing sectors, and progressive values. As the region continues to grow and evolve, real estate owners and investors must adapt to changing market demands, incorporate sustainable and resilient design features, leverage new technologies, and meet the needs of changing demographics.
In this blog post, we will explore how repositioning real estate assets can help meet these challenges and position owners for success in the dynamic Pacific Northwest market.
More than 1 billion square meters of office space globally will need to be retrofitted or converted to new uses by 2050.
Shifting Market Demands: Adapting to a Hybrid Work Model
The COVID-19 pandemic has upended many traditional ways of working and living, and the Pacific Northwest is no exception. The office market had hit a 30-year high of 17.3% vacancy at the end of 2022, according to CBRE. With the trend towards remote work and the rise of the hybrid work model, demand for traditional office space continued to decline. However, this does not mean that the office market will disappear entirely. As of March 2023, office occupancy has returned to about 50% of pre-pandemic levels. Real estate owners and investors must adapt to changing market demands by repositioning existing office and industrial assets to accommodate a hybrid work model.
Some options to create more flexible spaces include:
- Incorporating flexible and adaptable spaces that can be used for co-working or collaboration. For example, a building may include conference rooms that can be easily reconfigured for different group sizes, or private offices that can be rented on a short-term basis.
- Outdoor amenities such as green spaces or rooftop decks can provide a much-needed respite for workers who spend much of their day indoors.
- Breathing new life into previously vacant and weathered industrial structures with new additions or tenant improvements.
There has been a myriad of discussions about converting office spaces to multi-family housing, but developers are generally finding this idea is too costly to pursue at this time. Restrictions such as building codes, large floor plans, centralized utilities and other challenges make this option untenable for most investors.
Global real estate giants like JLL see the office market remaining challenging, but with less new construction of this product and a continued, although slow, return to the office, it is not obsolete. Give the increased age of the buildings, regardless of the continued use, JLL predicts that, “more than 1 billion square meters of office space globally will need to be retrofitted or converted to new uses by 2050.”
Sustainable and Resilient Design: Meeting the Challenges of Climate Change
The Pacific Northwest is known for its natural beauty and progressive values, but it is also seeing an increase in natural disasters such as earthquakes, wildfires, and floods. Additionally, workers are demanding more eco-friendly workplaces. In order to increase the resilience of real estate assets in the face of these challenges, it is important to incorporate sustainable and resilient design features into new and existing buildings. One way to do this is by incorporating earthquake-resistant design features such as:
- reinforced concrete or CMU walls,
- foundation anchors, and
- flexible framing systems.
We detailed the importance of and logistics to complete seismic upgrades in a previous article here.
Related to fire risk, defensible space around buildings, such as fire-resistant landscaping and fire breaks, can help protect buildings from wildfires. Evaluating fire resistant building materials, such as concrete, metal roofing and other details, can aid in preventing the spread of fires, as well.
Sustainability measures are important for the environment as well as workers. Measures that can be taken to reduce the environmental impacts of buildings include:
- Utilizing green energy sources
- Installing green roofs and rainwater harvesting systems to manage stormwater runoff and reduce the impact of floods
- Incorporate natural lighting and greenery
- Install smart windows
- Utilize controls to manage mechanical, electrical and plumbing systems
- Install Electric Vehicle Charging Stations
According to a JLL survey, ‘Up to 81 percent of workers aged 21 to 30 expect their company to follow sustainable business practices, and 70 percent of them would prefer to work for a sustainability leader’.
Leveraging New Technologies: Staying Ahead of the Curve
The Pacific Northwest is home to many leading technology companies, and as such, there is a high demand for buildings that can support the latest technologies. Real estate owners and investors who are able to incorporate these technologies into their buildings may be better positioned to attract tech tenants and stay ahead of the curve.
One way to do this is by incorporating high-speed internet connectivity, such as fiber-optic internet, into buildings. This can help attract tech tenants who require reliable and fast internet connections. Additionally, smart building systems that incorporate internet of things (IoT) technology, such as sensors and automation systems, can help improve energy efficiency and reduce operating costs.
What is the ‘Internet of Things’?
The Internet of Things (IoT) describes physical objects embedded with sensors and actuators that communicate with computing systems via wired or wireless networks—allowing the physical world to be digitally monitored or even controlled. For example, automated vacuums, self-checkout counters, autonomous vehicles, etc.
Changing Demographics: Meeting the Needs of a Diverse Population
The Pacific Northwest is becoming increasingly diverse, with growing populations of immigrants and younger generations. Real estate owners and investors who are able to adapt to these changing demographics may be better positioned to capture new market opportunities.
One way to do this is by repositioning existing retail assets to meet the needs of specific cultural groups. For example, a shopping center may cater to a particular ethnic group by including stores that offer culturally-specific products or services. Multi-generational housing that allows extended families to live together may become more popular as the population ages and becomes more diverse.
Another way to meet the needs of a diverse population is by repositioning existing office assets to support co-working or collaboration among entrepreneurs and small business owners. This can help create a sense of community and support for these individuals, who may be underrepresented in the traditional business world.
Repositioning real estate assets can be a powerful strategy for real estate owners and investors in the Pacific Northwest region of the United States. By adapting to changing market demands, incorporating sustainable and resilient design features, leveraging new technologies, and meeting the needs of a diverse population, owners and investors can stay ahead of the curve and position themselves for success in this dynamic market.
By repurposing assets, adding earthquake-resistant features, and integrating smart building technology, real estate owners and investors can create value for themselves and their tenants while contributing to the long-term health and vitality of the region.
Perlo is a Pacific Northwest regional commercial general contractor that specializes in both new, non-residential construction and renovations. If you are considering repositioning one of your real estate assets, please contact us today.