Newer office buildings often hold a distinctive appeal to tenants for various reasons. After years of remote work due to COVID-19 pandemic, the transition back to the office has commonly been met with mixed feelings by employees worldwide. Newer office space could potentially influence employee attitudes toward returning to the office.1
Indeed, a newer, more modern office environment has the potential to be a game-changer. Such spaces may not only feel refreshing and invigorating, but also potentially enhance an employee's desire to return. The promise of more comfortable work settings, and innovative designs may make the prospect of returning to work more appealing for some employees.2
Here are some key reasons why newer office buildings may be more appealing to corporate occupiers:
- Modern design and aesthetics: Newer buildings often feature the latest in architectural design and interior layout. Sleek lines, open spaces, and ample natural light may cater to contemporary aesthetic preferences.1
- Technology integration: Newer office buildings are commonly designed with the latest technology in mind. From high-speed internet infrastructure to smart building systems that manage lighting, heating, and security, technology is usually seamlessly integrated into the structure, typically ensuring convenience and efficiency.6
- Efficient use of space: Modern office designs usually prioritize flexible spaces that can be adapted to various needs, from collaborative workspaces to private meeting rooms. The layouts are typically optimized for both individual work and team collaboration, potentially fostering stronger team relationships than older, more traditional office setups.1
- Sustainability: Many new buildings are constructed with sustainability in mind, adhering to green building standards such as LEED certification from the U.S. Green Building Council. This might mean energy-efficient systems, environmentally-friendly materials, rainwater harvesting, or even green spaces and terraces. A sustainable building can also lead to cost savings for tenants in the long run and help companies meet their corporate social responsibility goals.4
- Health and wellbeing: Given the increasing emphasis on employee well-being, newer buildings often incorporate features that enhance physical and mental health. This can include superior HVAC systems for better air quality, biophilic design elements that bring nature indoors, and wellness centers or gyms. Most buildings recognized by the International WELL Building Institute are less than 10 years old.5
- Improved accessibility: In general, the newer a building is, the more accessible it tends to be for people of all abilities. This is due primarily to local building codes that require enhanced accessibility features.3
- Security enhancements: Advanced security features, from surveillance systems to biometric access controls, are more commonly found in newer buildings, typically because they rely on newer technology infrastructure and robust electrical systems. For tenants with stringent security requirements and the need to create a secure environment for businesses and their employees, newer buildings may generally be more appealing.2
- Amenities: Many new office buildings typically offer a range of amenities to attract and retain tenants. These can include cafes, rooftop lounges, childcare centers, concierge services, and more. Such amenities can potentially enhance the working environment and daily experience for employees.2
- Brand image: Occupying a new building can often elevate a company's brand image. Generally speaking, it can signal to clients, partners, and employees that the company is forward-thinking, successful, and committed to providing the best environment for its operations and staff.1
- Cost efficiency: While newer buildings might command higher rents, they typically come with energy-efficient systems that can potentially result in lower utility bills. Moreover, the reduced need for immediate repairs or upgrades commonly leads to cost savings in the long run.4
While older buildings have their own charm and may even be preferred because of specific locations, newer office buildings commonly offer a combination of design, technology, and amenities that align with modern business needs and employee expectations.2
Market volatility or lack of liquidity could impair an investment’s profitability or result in losses. Factors such as high vacancy, oversupply of the product in the market, increase in interest rates for borrowing loans, bad credit quality of tenants occupying the property, general economic risks such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws and general overall deterioration of the market in which the asset sits, all of which could lead to financial difficulties and impact net operating income and can depreciate the value of the property. These factors, in addition to others including increases in the costs in excess of the budgeted costs, the burdens of ownership of real property, environmental liabilities, contingent liabilities on disposition of assets acts of God, pandemics and other national, regional or local emergency conditions, terrorist attacks, and war may affect the level and volatility of asset prices and the liquidity of investment assets.
In addition to more general risks such as high vacancy rates, oversupply of product in the market, and credit quality of tenants, some of the factors that can impact the success or failure of office investments include whether the property is single or multi-tenant and average length of the lease.
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