The commercial office market in Southeast Wisconsin is in a state of dynamic evolution, influenced by economic trends, technological advancements, and changing employee work preferences. As a business owner, you are likely contemplating what to do with your current office space. Should you renew your lease, relocate, or invest in updating your existing space? We don’t have a Magic 8 Ball, nor can tell you that one size fits all, but we can provide insights to help you make the best decision possible for your business and employees. We’ve talked to three local industry experts and asked them what success looks like to their clients, Kevin Lally Director of Commercial Interiors with Hunzinger Construction Company, Ron Moore Vice President with Automation Arts, and Jenna Maguire, Vice President at Colliers Milwaukee.
Regional Office Market Trends Include:
The rise of remote work has prompted businesses to reevaluate their office space requirements but has also raised concerns about employee productivity. Unfortunately, many owners are finding it very difficult to get their employees back to the office full time and with the current competitive job market, the power is in the employee’s hands. The most effective solution seems to be opting for flexible work arrangements, but this is leading to a potential decrease in demand for traditional office space or necessitating the reconfiguring of current office space. What is the best or right office solution? Many variables determine what is the best solution for your situation. We interviewed experts in the field to help you base your decisions about what might be best for you. Here are some of the things they recommend you take into consideration when assessing whether to stay, expand, downsize, or relocate.
A Case for Staying and Getting Back to the Office:
“We’ve seen several larger corporate clients invest in renovating existing spaces to create excitement around employees coming back to the office,” says Kevin Lally, Director of Corporate Interiors at Hunzinger Construction Company. For example, one of Hunzinger’s current corporate clients is focusing on refreshing spaces, adding technology, flexible work environments, and other amenities. This client has even created a specific internal marketing campaign with the sole purpose of getting people back to the office to recapture the collaborative work environment and reinvigorate the company culture.
“This recently completed renovation allows employees to test drive the space and provide feedback on what they like and don’t like,” Lally says. “The intent is to allow employee feedback to help guide decisions on future renovations and modifications to the employee’s environment.”
Investing in portions of your master plan, allows your company to figure out what works and what doesn’t work to keep employees happy and could give you confirmation of what could be a substantial investment.
Why Staying on the Forefront of Technology is Essential – Technology in the Office:
The integration of technology in the workplace has become pivotal. Businesses are seeking office spaces that support collaborative technologies and provide a seamless blend of in-person and remote work capabilities. We reached out to Ron Moore, Vice President at Automation Arts, and asked for his insight as to what technology his clients are asking for in the office.
“There is definitely a difference in technology between large and small companies, but they all must have a remote component in the office, or they just will be left behind,” says Moore. “For example, one of our largest corporate clients is downsizing, and the majority of its offices now are “hotel spaces” with hotel systems, meaning no one has an assigned desk. When an employee decides to come into the office, they can pick a desk, plug their computer into a workstation, and get to work.”
“There is the most up-to-date technology in every room, designated coffee, and food spaces, and almost every meeting room has someone virtual, so there is a video conferencing component in every room. We would call this ‘Down-size, remodel, and refresh,” says Moore. “What we are seeing, throughout all the companies we’re working with, is they are upgrading their technology and they are creating work environments that are more “welcoming.” Companies are asking themselves, ‘How do we make this feel more comfortable and more like home?” says Moore.
It’s clear that many companies have dated technology that needs to be updated in order to get employees back to the office full-time.
Interestingly enough, our Hunzinger Team is starting to see companies become very innovative with room schedulers. Room schedulers can be used in a way to collect data about how a space is being utilized, how often the space is used, what the energy usage is, who is using the space, who is not showing up to meetings, etc. How companies are using this data is still being developed, but this information could potentially help facility and building management teams determine space and mechanical system needs. It can help determine where a company is spending facilities money and how can it be used more efficiently.
“Finally, people are using these schedulers to map out the meeting and office spaces throughout the day and show what spaces are available and what spaces are in use. The employee can reserve their space before they even get into the office for the day,” says Moore.
Involve a Construction Manager Early in the Process:
It’s important to bring your construction partner, like Hunzinger Construction, on as early as possible to help understand the possible scope of your potential project and to create cost, schedule, and even Building Information Modeling (BIM) exercises. A strong Construction Manager can help provide you with the information necessary to determine the most cost-effective option. Do you stay and renovate or move to a new space? It’s also very likely that your business will be disrupted at some point, whether you are remodeling or relocating, and keeping your people connected to their computer networks is critical to your operations. So, we strongly recommend that you include the company that will be designing and installing your technology, in the architectural design phase. “Without the input of your technology A/V expert, you could get a very inefficient room for sound and privacy,” says Ron Moore.
To Renew or Relocate, Assessing Your Options:
When Lease Renewal Makes Sense: For some businesses, renewing a lease may be a strategic option, especially if the current office location is well-aligned with the company’s operational needs and growth plans.
“Renewing your lease seems to be the easiest thing to do, but once a tenant considers downsizing or rethinking design, living through a significant remodel may prove to be more disruptive than relocating,” says Jenna Maguire, Vice President at Colliers. “Many tenants coming out to the market lately make the assumption that rents should be low, due to higher inventory, but building owners and management companies are holding rental rates pretty firm.” It’s true that vacancy rates are up, but that’s not the case for every asset class or location. Class A downtown products are becoming scarce, and submarkets like Westown and the Third Ward are performing very well. Contrary to what you might believe, landlords are not slashing rents, but they may be contributing more to tenant improvements as a concession due to rising costs.
We asked Jenna, what are the most common reasons to renew your lease and improve the space:
- When the building has a smaller space available, the tenant can downsize or expand their current space if other space becomes available in the building.
- The landlord is willing to contribute to improvements.
- The current location is great for your brand, employees, and recruitment.
- Unfortunately, a common reason companies renew leases is that they did not plan well enough in advance, and they’ve run out of time to plan a build-out of a new space.
Ask yourself, what do you need in, or from, your office space? You’ll need to determine where the breaking point is, the reconstruction of a space might be too disruptive, and the cost of renovating might make more sense to just move and not renew your lease.
When Relocation Makes Sense: Exploring new office locations may be advantageous for businesses seeking to tap into emerging business districts, accommodate workforce changes, or enhance their corporate image.
“For a few years now we’ve been seeing a huge influx in suburban companies moving downtown, Milwaukee Tool and Fiserv to name a few,” says Jenna Maguire. “Companies who make this type of decision are trying to attract the best talent and believe that downtown is the best location to do this.
Another thing to consider is the amount of time your employees spend in the office. “If the majority of your employees are not doing their entire 40 hours a week in the office, with the savings from downsizing in space, many tenants can now afford to upgrade to a higher-end building or a more compelling submarket typically with the goal to provide more amenities to their employees,” says Maguire.
“The best advice I can give is to leave yourself plenty of time, as lease deals take a lot longer than ever before. You need to allow for time to assess space needs, negotiate a lease, rethink and account for permitting, entitlements, and the actual construction of a buildout, in addition to moving/fixturing.”
In conclusion, consult with your broker, construction partner, and designer, to determine what makes the most sense for your business based on cost, amenities, location, and business disruption.
In the ever-evolving landscape of the Southeast Wisconsin commercial office market, business owners face pivotal decisions regarding lease renewals, relocations, and office updates. By carefully assessing market trends, conducting thorough analyses, and surveying the opinions of employees, owners can make informed decisions that position their organizations for success in the dynamic world of commercial real estate.
Hunzinger Commercial Interiors is the operations, maintenance, and improvements division of Hunzinger Construction Company. The Commercial Interiors Division specializes in a full range of construction services. From preconstruction planning and estimating to renovation and construction management and general contracting services, we’ve got you covered. Whether you are expanding, remodeling, or enhancing an existing or new space, our industry professionals are there to complement your team. CLICK HERE to see some of our projects.
