Commercial Real Estate, Office Space, and Transportation w/Joey Kline
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Episode Description
Welcome to the Freedom Point Real Estate podcast! In today's episode, Joey Kline walks through his background (starting with business school), trends in office space real estate, what transit expansion advocacy is and how it impacts commercial real estate, and more.
Joey is a commercial real estate broker. He focusses on representing corporate tenants in diverse industries like technology, professional services, manufacturing, and entertainment. Joey is based in Atlanta and is the host of Tech Talk Podcast. He is passionate about urban focusses developments and transit expansion advocacy.
CONNECT WITH JOEY KLINE!
Website: https://www.joeykline.com/
LinkedIn: https://www.linkedin.com/in/joey-kline-5a96408/
CONNECT WITH JEREMY DYER!
Website: https://startingpointcapital.com/
Instagram: https://www.instagram.com/startingpointcapital/
LinkedIn: https://www.linkedin.com/in/jeremydyer
Facebook: https://www.facebook.com/startingpointcapital
Book a Call! https://calendly.com/startingpointcapital/discuss-investing-with-jeremy-dyer?month=2023-12
Summary
Tip #1: Understand the Bifurcation of the Office Market
"The office space world has been bifurcated... into the haves and the have-nots."
The office market has split between high-performing, differentiated Class A buildings and outdated properties. Investors should focus on Class A buildings with strong locations, amenities, and design. These spaces continue to attract tenants, while functionally obsolete buildings are struggling to survive.
Tip #2: Location Matters More Than Ever
"It’s not an urban vs. suburban issue. There can be amazing office property in the suburbs."
Whether in an urban or suburban setting, the quality of the location is key to maintaining occupancy. Tenants are seeking spaces that offer both convenience and amenities, which is why properties in prime areas are still in demand.
Tip #3: Focus on Experience-Driven Workspaces
"If the office has to be an elevated experience, those types of properties don’t cut it."
The modern workforce expects more from their office environment. Properties that fail to create an elevated experience, such as those offering only basic functionality, will continue to see vacancies. Investors should focus on adding value through amenities and workspaces that foster collaboration and creativity.
Tip #4: Be Aware of the Impact of the "Functionally Obsolete"
"25-30% of The Office Inventory... is for all intents and purposes functionally obsolete."
A significant portion of the office space market is no longer viable due to poor design and lack of amenities. Avoid these properties unless there is a clear opportunity to repurpose them, as they may continue to underperform or sit vacant.
Tip #5: Capitalize on Distressed Properties
"A building just sold for 30% less than it was bought for."
There are generational buying opportunities in the office market for investors willing to take risks. With many properties selling below their previous purchase prices, smart investors with available capital can scoop up assets at deep discounts.
Tip #6: Consider Repurposing Underutilized Spaces
"I have definitely seen some single-story office buildings go more kind of flex warehouse industrial."
Some office buildings can be repurposed for industrial or mixed-use, but this depends on the location and design. Converting office space into residential or storage is also a potential play but comes with significant challenges, including zoning issues and renovation costs.
Tip #7: Understand the Challenges of Office-to-Residential Conversions
"Office buildings from the past 30-35 years have floor plates that are too deep."
Not all office buildings are suitable for conversion into residential spaces. Modern office buildings often have large floor plates, making it difficult to create functional living spaces. Older buildings with smaller floor plates are more likely candidates for such conversions.
Tip #8: Pay Attention to Infrastructure and Transit Accessibility
"We’re going to choke on ourselves at some point if we don’t expand transit."
Public transit accessibility plays a crucial role in the long-term viability of office spaces, particularly in urban areas. Investors should look at properties with strong infrastructure support, as cities with limited transit options may struggle to maintain high occupancy rates.
Tip #9: Prepare for a Prolonged Market Shift
"For a lot of owners, it is going to be the five stages of grief."
Many office property owners have not yet accepted the market's downturn, making properties untransactable. Investors should be patient, as distressed properties will eventually come to market when owners realize they need to sell at lower prices.
Tip #10: Leverage Technology to Attract Tenants
"We really don’t talk about real estate; it’s more about Atlanta’s Tech scene."
Tenants in the tech industry often seek spaces that align with their innovative culture. Emphasizing smart building technologies, flexible workspaces, and urban locations can attract these types of tenants, positioning properties for future growth.
