Introduction. The real estate industry is about to give birth to the most transformative era in the office marketplace in a generation – it’s messy, it’s loud, it’s frantic and its future is yet to be seen. But it is definitely upon us and there is no way to stop it.
The prospective of declining demand and increasing costs has chilled many development aspirations over the last 9 months and the remaining players are preparing for a battle that will be won with technical superiority and scale – and will be richly rewarded at its conclusion. The laggards in the market will never be more exposed than they will be in the next several months, and here are some thoughts about what will differentiate the winners from the losers.
5G – WHAT, WHY AND WHEN. OR IS IT WHEN, WHAT AND WHY?
As so often happens, the hype about new technologies bubbles over before anyone has access to it or can apply it, and that’s never been truer than of 5G, or the coming fifth generation of cellular technology. For context, consider that 4G – which enabled the delivery of concepts like UBER – was widely available beginning in 2012 and developers are not done stretching the potential of applications on the platform. 5G is a long way off from effecting are daily operations, but if we don’t start to anticipate its impact and plan around it, we may suffer a fate like the independent cab companies who were not ready for UBER and face extinction as a result.
For office building owners, there are three ways to look at 5G:
1.How do we participate in providing the service, given that the large cellular companies are not going to install the necessary equipment for free? There seems to be a far greater opportunity for building owners to generate revenue from 5G as a result of the CBRS 3.5 mHz frequency band, which allows us to become essential phone companies who can resell or receive royalties for connectivity. Still and all, there is no model or application readily available for adaptation, but the leaders in this space could discover a potential profit vehicle and be able to differentiate themselves from competitors by having 5G available. If you have not heard about CBRS and don’t know what it is, you can find lots of information on it at www.connectedREmag.com
2.The better and more advanced forward thinking the tenant, the faster they are going to want 5G. 5G is the route to not only far greater cloud computing, but it lets network operators instantly model the condition of every aspect of their business and access business and artificial intelligence in making decisions. It will have profound mobility impacts on everything from trading to gaming to logistics to streaming to . So, similar to how data center specialists experienced outsize returns from early expertise – those who can deliver 5G first will find outsized rewards and will enable the next phase of the technology revolution.
3.Even if you know the who and the why, the when is a vexing question. The chips are not even in the phones yet, for the most part, and the programming for applications is only in its nascency. The key is: get smart now. Envision the relevance of 5G service to the properties you manage. And make sure you have the right trust your tech guy.
PREPPING OFFICE SPACE FOR REPOPULATION.
You might think that the industry is done with the heavy lifting of creating practices around office repopulation because in many buildings, best practices are already in wide circulation – at least in theory – and enough people are back at work long enough that initially clunky processes have been worked out. But most people are still working from home or have scheduled office hours that are far reduced from normal operations. It is easy to adhere to distancing when the office is at 30% capacity. What about at 80%?
At Onyx, our extensive repopulation plan was developed with major health agencies and received the Hackensack Meridian Seal of Health – and some of our peers have equally compelling programs. Our industry’s continuing challenge is assuring that our tenants adhere to practices because in the long term the viability and productivity of the office space is the product we sell, and we are required to support the demand for it. No one can take hands-off attitude about tenant utilization because if they can’t support a workable plan in their office they may reduce their space needs.
The solutions are out there, it is just a matter of applying them in a discipline way. Companies may not have standards and practices – even simply around communications – that will overcome concerns about infection spread. As a service provider, the property owner is in a unique position to understand the needs of the tenants to assure safe and secure conditions for the building.
THE RELEVANCE OF THE OFFICE.
Each marketplace is going to reflect its inherent exposure to COVID in the recovery. In New Jersey, we are benefitting from our proximity to New York City – most companies of course will maintain a New York presence during the recovery of that critical economic center whose infrastructure could never be replaced and its dynamism will reemerge. However, many companies will create satellite offices or convert on what they learned from remote working during COVID to move things around a bit. That will be good for our suburban locations here. Urbanism has been the trend of recent years and especially as a result of the renewed popularity of downtown housing, we see most markets finding a recovery in office because although there will be displacement from changes to the operations of existing legacy tenants, our evidence is that most companies have reaffirmed the importance of physical presence and in-person communities and not determined they are as effective and productive off-site. Certainly, technology allows them to make adjustments that would likely reduce their space needs, but it will not be at a wholesale level
OFFICE TECHNOLOGY LEADERSHIP
Scale and technology go hand-in-hand and both are leverageable in this environment. The more office space under management, the more capable the organization is of understanding technology applications and converting their knowledge into value for tenants and their own enterprises. Responding to tenants as they articulate their technology needs with insights is incumbent on real estate companies; but enlightening tenants as to the technology advantages available to them that they may not even conceive of is a true differentiator.
Onyx’s commitment to understanding information technology has resulted in making investments in technical infrastructure at appropriate times – adopting technology in anticipation of its relevance and being prepared as tenants demanded it. We knew what it meant that there was 10g capacity in Newark before we bought Gateway: there will be companies who want to leverage that advantage that have few other choices nationally, and while even our recent tenants may not yet fully appreciate what it means, they eventually will. Gateway did NOT feature WiFi 6 when we acquired it – we were the first office building to offer it in New Jersey, and similarly, most devices in use do not have WiFi 6 chipsets – but it was inevitable that it would be the standards so we decided its presence would appeal not just to early adopters, but to company’s who would value our leadership.
But the key part for us has been that because we learned how to resolve installation and marketing issues relative to technology in Newark, we were hungry to do it throughout our platform – a smaller owner may not have had the bandwidth to do that.
Real estate and CRE technology investor, Jon Schultz has combined his passions for real estate and technology as the Co-Founder of Onyx Equities. Through Jon’s vision and creativity, Onyx has become one of the most diversified and active real estate investment, management and property service organizations in the Tri-State area. He has been instrumental in the capital-raising initiatives via Onyx investment vehicles. Under Jon’s leadership, Onyx has embraced innovations that few other real estate companies have adopted – transforming nearly every aspect of the company’s operations.
A serial blogger and authentic public speaker, Jon has also helped foster a new culture of tech-savviness and awareness in the commercial real estate space. Sharing his thoughts and experiences in everything from mentorship to real estate technologies, his weekly blogs and often outspoken social media feed have landed him on numerous “Top Influencer” lists in both the real estate and CRE tech space.
Jon is a board member of the Big Apple chapter of YPO, the premier network of chief executives and business leaders and is a founding board member of the “Award of Courage” foundation. In this role, he raised significant funds for Memorial Sloan-Kettering Cancer Center and is a past recipient of their Humanitarian Award. His philanthropic efforts are now a significant part of his professional and personal life. Jonathan is also a member and Treasurer of the Riverview Medical Center Foundation Board of Trustees which serves the Hackensack Meridian Health Network. Jon also sits on the board of a publicly traded company in the technology arena and is a member of Mindaligned, a collective impact initiative to create arts-engaged schools.
