A cat jumps down from an-looking brushed aluminum bookshelf set in front of exposed duct work, and pads across the concrete floor. A pinball machine and a pool table sit ready for play next to the receptionist desk. A 20-something worker sporting bleached hair and a goatee - but who is easily worth seven figures - drifts in wearing jeans. There's an in-house espresso machine, and a conference room with futons. This is the cosmetics of the new, high-tech workspace. It's what goes on behind the scenes and out of sight that makes this kind of office space a whole new animal.
It's not often a new paradigm is created in business. More often than not, we are talking about a smaller change to the established model. In the commercial real estate industry, the last genuinely new product type was in the middle part of the 20th century - the regional shopping center. It was not just a larger multi-tenant retail center. It was a new concept involving destination shopping and entertainment.
Today, there is demand for a brand new product type. The exact parameters and the best archetype for this new product have not really been determined. The tenants? The high-tech/telecommunications industry. This industry is large, productive and growing exponentially. According to a study by the research firm RFA/Dismal Scientist, information technology employment accounts for 10% of the workforce and nearly 20% of the economy's output, and both of these measures are growing fast. It is the most important sector of the economy and the office market.
Under the old paradigm of office space, the "end-all, be-all" for a facility was marble and granite, grand foyers and a double-door entry off the lobby. Today, we have heard the minimum needs for technology companies: telecom infrastructure; multiple telecom providers and fiber-optic network options; open, flexible space; an oversupply of clean, redundant power; high floor-load capacity; high floor-to-ceiling heights.
Hesitant to build To meet these needs, most developers and property owners have elected to renovate existing properties rather than build new ones. There are good reasons. For one, a high-tech renovation can generally be done much faster. Another reason is that although some high-tech needs are established, many of these companies' needs are not well defined. Further, there is a great distinction between the various types of high-tech companies and their needs. An ISP company's needs are nothing like that of a software developer or an application service provider.
Thus, creating the perfect new product for all of these users has been a challenge. Developers largely have been reluctant to create these new high-cost buildings on speculation, preferring to work with a high-tech client in rehabbing existing properties.
This preference for renovation over newis also driven by the location dynamic. These technology companies need to be on substantial power grids and on the fiber-optic networks of multiple providers - you can't get that guaranteed out in the boonies. But you can find older office buildings, shopping centers and warehouses in city centers, often considered functionally obsolete, that can be turned into high-tech facilities, whether the use is for high-tech people or high-tech equipment.
New type of management Landlords and property managers also are realizing that this new paradigm in real estate product demands a new kind of real estate management expertise. Property management in the past was primarily for traditional office users such as banks, law firms, oil and gas companies and many privately owned businesses. The melding of real estate and high-tech means a whole new mission and depth of understanding that property managers must bring to the table. It's not enough to know what the facility needs are. You have to know why tenants have these needs, and how to provide the support and maintenance required to keep them running 24/7.
Technology is becoming such a part of doing business for all industries that one day this new high-tech facility paradigm will replace traditional office space. These trends will only be more important to real estate professionals as they spread to the broader economy. As the clients of these high-tech companies continue to adopt the advances and many of the business practices associated with the high-tech and telecom industries, soon the term traditional office space will be wholly displaced by what we call high-tech office space.