Hybrid work schedules, infill push part of commercial real estate trends

Clay Ramey, vice president of capital assets for Tempus Realty Partners, recently offered his thoughts on commercial real estate trends he’s seeing in Northwest Arkansas and other regions of the U.S. heartland.

Tempus Realty Partners develops and manages commercial, office and industrial properties across the Southeast and Midwest.

Ramey said “build-to-suit” development, especially for industrial and office, is picking up momentum in the post-COVID return to on-premise work space.

“You’re seeing tenants want exactly what they want,” he told Northwest Arkansas Business Journal Editor-in-Chief Roby Brock in a recent radio/podcast interview. “You’re having consolidation from locations, or they’re trying to increase morale and increase buy-in from employees on returning to work and being effective. And so the office is not just a place anymore, but it’s a place to develop talent and retain talent and move forward instead of just sitting at the desk.

“If you back up pre-pandemic, a lot of the conversation we had with tenants, large tenants especially coming to offices, it was ‘how much parking can you provide?’ And they want to know how dense of an office they can have, how many people they can fit inside the facility.

“Whereas now, there are employers that have hybrid schedules,” Ramey said. “There’s employers that have a much more collaborative schedule since COVID taught us all how to work remotely but also work more effectively from just a touch-down space. So we’re seeing employers consolidate to a smaller square footage, but it’s a much nicer footprint and a much more collaborative footprint. We’re seeing that in Northwest Arkansas, but we’re also seeing that up in Pittsburgh, parts of Minneapolis and parts of Columbus.”

Ramey also said that while A-asset real estate is a hot commodity, economic conditions and an effort to infill space are leading to interest in B-class assets.

“We’ve seen a lot of flight to quality, but we’ve also seen that class B stuff is starting to be repurposed,” he said. “We’re seeing demand start to increase on those class B properties. They’re still going to see tenants want newer space, but the value proposition of going into a class B space is going to become more evident. And I think we’re going to see tenants choose that from a profitability standpoint over the next year or two.”