[December 2023]
1 minute speech_Week 3 in December
Presentation script :
Good morning everyone, and thank you for joining us today. I'm here to discuss recent trends in the workplace. Many businesses, including big names like Exxon Mobil, are choosing to keep employees working from home, leading to less demand for office space. This shift is causing changes in the commercial real estate market, with a focus on high-quality office spaces in southern U.S. cities like Phoenix and Miami. Despite challenges like rising interest rates and labor shortages, there's a move towards more modern, well-located offices. This trend suggests a new normal in our work environment. Thank you for your time, and have a great day!
여러분, 안녕하세요. 오늘 이 자리에 함께 해주셔서 감사합니다. 저는 최근 사무실의 변화에 대해 이야기하려고 합니다. 미국에서는 엑손모빌과 같은 큰 회사들이 재택근무를 유지하면서 사무실 공간에 대한 수요가 줄어들고 있습니다. 이러한 변화는 피닉스, 마이애미와 같은 미국 남부 도시들의 고품질 사무실 공간에 초점을 맞춘 상업용 부동산 시장에 영향을 미치고 있습니다. 금리 상승과 노동력 부족과 같은 도전에도 불구하고, 보다 현대적이고 위치가 좋은 사무실로의 이동이 있습니다. 이러한 추세는 우리의 근무 환경에서 새로운 균형을 시사합니다. 여러분의 시간을 할애해주셔서 감사하며, 좋은 하루 되세요!
GPT Link
https://chat.openai.com/share/5c9449c5-51ad-4465-a63f-afd0519e212f
Video
Title : Commercial real estate experiencing 'a flight to quality' through amenities: JLL CEO
Link : https://youtu.be/3EsdoqShvb0?si=E1aJjl0Rq1XuyQ65
Video script :
Overview of Current Business Trends in Office Space Usage
Businesses are rethinking how and where their employees work, many companies deciding not to resign leases in favor of keeping their workers at home. Exxon Mobil might be joining them, as there's a report that the oil giant is considering leasing or selling its unused office space in Houston. The company reports that only a fraction of its less than half of the available office space on its Houston campus is being used.
Commentary by John Gates, CEO of America's Markets at JLL
For more on this and what this means for the commercial real estate market, we want to bring in John Gates, JLL CEO of America's markets. John, it's good to see you. Exxon, far from the only company, we also heard Meta making a similar move in Austin earlier this week. Is this consistent with the trends that you're seeing? The corporate America, probably Global corporates, still sort of struggle with what return to the office is going to mean on a permanent basis.
The Trend of Hybrid Work and Regional Variations
So we take hybrid work in some form or fashion is here to stay for many companies, and there are some workers that probably would continue to work from home or work remotely much, if not all, of the time. Yes, but there is a greater return to office probably that people are aware of right now. And John, what's the regional story, where are you seeing the most growth when you when it comes to the return to office story? It is definitely there is a regional story so in the United States that would be across the South, the immigration markets we call them, but Phoenix is a winner, Metro Dallas is a winner, Austin is a winner, Nashville, Charlotte, Atlanta certainly South Florida and the Metro Miami area.
Office Vacancy Rates and Trends in Office Space Quality
So it's almost across the board in the larger cities or Metro areas across the southern U.S. John, you mentioned it was a little bit greater than we think outside of those top cities, what are we seeing play out in the rest of the country and what do the vacancy rates look like? It definitely varies by city, right so Industries and geographies Vary, but it is taking up nationally to very close to 50% and we're predicting that by the end of the first quarter could be as high as 60% on an average day. Um, which is a pretty good metric, Office Buildings have never been 100% full right people come and go they travel for business they have personal lives that they're that they're working with. So uh, but vacancy rates are higher in those Southern cities and then the other very strong Trend we see is what we call a flight to Quality so newer um you know better space more amenitized maybe a better location closer to public transportation uh the space that has a cool factor to it it's got maybe a good retail amenities in the neighborhood those buildings are definitely leasing in a materially higher rate and they have much greater uh occupancy than older product does.
Impact of the Pandemic and Economic Conditions on Leasing and Rental Prices
And John, what do you think in terms of Leasing and Rental prices how do they Stack Up versus pre-pandemic? Jail of Two Cities so if we take the last comments uh for the newer product the flight to Quality we're seeing all-time Peak rents set in probably two-thirds of the big markets in the United States in in the last 12 calendar months probably even this year. So that's very different than what we're seeing happen with older Office Buildings where they're struggling to you know maintain rents as high as they had pre-pandemic. So it's very binary in that regard I would say. John when you take this and and also I guess combine the fact that we are in a rising rate environment right now the FED saying it's going to remain committed to to raising rates that obviously could spell some trouble here for commercial real estate.
Investment Opportunities and the Future of Commercial Real Estate
I'm curious just how this has impacted your investment opportunities and are you being more conservative given the current macro environment? Uh, you're probably more conservative or more disciplined in your decision making depending on where you're looking interest rates excuse me commercial office space rely on long-term capital and often uh a debt is part of the capital structure in those and so the cost of capital is going up it's going up for all operating businesses as well and so you're selective in in where you're where you look we see a Slowdown in velocity of both sales of assets right now and you know commercial mortgages there's a lot less construction activity any kind of commercial asset class and I think that'll continue for a while because as you know the FED has been very clear that they're not done.
Predictions and Expectations for Normalization in the Market
And John is there any sense of when you might see this normalizing at some point? I would think uh at the end of the first quarter maybe I think business people whether they're investors or operators and operating businesses want to see uh Trends and so inflation's tick down a little bit if it starts if it clearly to business people is moving downward and the fed's actions are working that gives a little more predictability to people and I think you'll start to see transaction activity increase at that time whether it's signing commercial leases or selling assets or recapitalizing and refinancing them so you know my sense would be that's probably late uh q1 or maybe early Q2 but we'll need to continue to watch there's a lot of inflationary pressure out there still.
Supply Chain Challenges and Labor Market Conditions
And as we look through the supply chain whether it's things like labor and in developing some of these things as well as some of the construction materials prices what are some of the headwinds or what are some of the pricing that you're expecting there? I think labor will be a greater challenge than supply chain disruptions and spikes and materials cost much of the supply chain is renormalized you see container shipments as an example the cost of container shipments have come back and the demand for materials has slowed when you move interest rates as much as they have you see construction activity really slow down it has a major impact on the single family uh housing market as we all know and and mortgages get very very expensive so you see a smaller velocity of people moving and you certainly see a dramatic slowdown in construction starts we have a lot of we we have a labor shortage though in our in our country and our economy and I think that continues in non-office working jobs for sure and we have a lot of stimulus still coming so I think construction spend will shift to maybe ESG related activities for example and that needs work and labor as well. So I think materials will be less of a problem Supply chains and cost of materials will be less of a problem than availability of labor and probably the cost of Labor. Certainly a lot to keep an eye on, we do appreciate you breaking all this down for us John Gates thank you so much have a great week. Thank you for having me. All right coming up fans of Weird Al.