By Diane K. Danielson, SVN International Corp.
This article will also appear in The VIEW, the quarterly newsletter of Commercial Real Estate Women San Francisco (CREW SF). CREW SF’s mission is to develop and advance women as leaders in the commercial real estate industry. It is dedicated to changing business’ gender trends and closing the parity gap by giving women in real estate the support, resources, and opportunities they need to connect, influence, and lead. For chapter news, events and membership information visit crewsf.org.[dropcap]I[/dropcap]n 2015, millennials surpassed Generation Xers and their predecessors, the baby boomers, to become the largest generation in America’s workforce.
Anytime we pass the generational baton, we experience change in our workplaces and in how we use commercial real estate. Baby boomers grew companies under command-and-control leadership and remained loyal to those companies, which built suburban campuses and high-end offices in Class A space with executive floors and corner offices. Generation X ushered in the Internet and casual days, the latter of which seem almost quaint today. Yet they were also the first generation to talk about flexibility, and many built home offices from which they started their own companies.
We now have millennials once again changing the way we “office” and how we live and work in our cities.
1. The urban campus
General Electric in Boston, McDonald’s in Chicago, and Pinterest in San Francisco are just a few of the companies locating or relocating their headquarters in downtown areas. What’s driving this urban immigration? It’s not solely the tax breaks; it’s a war for talent. Millennials want to live and work in areas that are walkable and bikeable and that have recreational facilities and public transit. Another driver of the urban campus is the proximity to synergistic resources, like research universities and incubators.
Unlike in past years, companies aren’t seeking out space in Class A office towers. Instead they are building anew or renovating space to their liking, which means sustainable and green architecture, more spaces to congregate, room for pop-up lunch vendors, glass walls (or no walls), and high ceilings. Class B brick-and-beam is more attractive than traditional floors with executive offices surrounding a sea of cubicles.
2. Urban storefronts
We are also seeing traditional suburban big-box retailers like Target and Staples following the millennials by creating scaled-down urban storefronts. These stores have smaller footprints, same-day delivery, and curated content. Items are geared to the apartment dweller and come in smaller packaging options so it’s easier for shoppers to carry their purchases home and store them.
3. Co-working spaces
Even non–Fortune 500 companies are chasing the millennials into the urban core. The most cost-effective way to do so is in co-working spaces. WeWork is the leader in this area, with 90 locations around the globe. Due to demand, its model has moved beyond serving small businesses and individuals to working with larger companies like the aforementioned General Electric and Pinterest.
Finding the right buildings for co-working spaces involves more than a location that has nearby retail and public transit. Buildings must be retrofitted to accommodate more people per square foot. Co-working spaces have downsized the ratio of square feet per person from 175 to approximately 70. This also means accounting for HVAC issues, air quality, noise (high ceilings are a must), and modernized elevator systems.
4. Co-living spaces
WeWork is also changing the face of city living with their WeLive locations. Whether you consider them micro-apartments or dorms for grownups, they provide an alternative to a traditional lease with roommates. Their flexibility and community feel have made them popular with more than just millennials. However, they are unlikely to solve the issues of affordable workforce housing many are still facing in high-priced urban areas.
5. Urban manufacturing
The General Electric move into Boston also reflects another change that’s happening in urban real estate. Thanks to innovations in 3-D printing, lean manufacturing techniques, and online marketplaces like Etsy, we are seeing a rise of “makers” or smaller manufacturers here in the US. Many of these new companies are run by millennials and are locating downtown and near research universities. General Electric is specifically designing its Boston headquarters to accommodate local creators and makers in an incubator-type setting.
6. Smart infrastructure
As the millennials flock to cities—and companies follow—it spotlights the need we have to not only reinvest in our infrastructure but to reinvent our infrastructure. As more people move into microapartments and cram into co-working spaces, the strain is showing on public transportation systems that in some cases were designed over a century ago. Other infrastructure challenges include urban heat and rising seas due to climate change. Cities around the globe are experimenting with smart technology, self-driving cars, and green infrastructure that can cool cities and control flooding.
These infrastructure challenges require long-term solutions, and the commercial real estate industry will play an important role in ensuring that our cities are sustainable and livable even after all the millennials retire.
About the Author
Diane K. Danielson is the chief operating officer of SVN International Corp., a commercial real estate franchisor headquartered in Boston. Danielson, a 2015 Real Estate Forum Woman to Watch, was recently appointed to the CREW Boston Legacy Council.