His take: commercial real estate managers have been focused on saving energy, and are now shifting, to include improving the productivity of workers. They have a product called IntelliCommand which enables building operations managers to continuously monitor and adjust building performance for enhanced occupant comfort and productivity. Sounds good for everyone!

One of the first presentations was on the topic of High Performance Workspaces, one of my favorites. Kevin Sheehan from Boston Properties presented: there is a revolution in the workplace. Custom is in, cubicle is out. Traditional office space is like a frog in a slowly boiling pot – hopefully it will wake up and jump out before it’s too late. Kevin referenced Jim Lauman at Google, who has explored the intersection between people, space and technology. Workplaces are all about collaboration now. Rather than an assembly line for production, offices are for heuristic activity and creativity.

He described how people cost 10x the cost of space, so space has to be leveraged to support the brand and culture, to foster collaboration, to engage with sustainability and to attract and retain top talent. There’s a war for talent going on – and young people today care most about salary but #2 is their work environment. The office is not a commodity, and it’s not being replaced by telecommuting. He recommended we read a book called “Honest Signals” by Sandy Pentland, advocating for face to face collaboration, and also “Where Good Ideas Come From” by Steven Johnson. Innovation for businesses happens in team settings, in offices.

A lot of his presentation was going over the Google remodeling that has happened at their space in Kendall Sq – opening up and connecting floorplates to enable the firm to grow in-situ, and to foster communications and spark conversations which is at the heart of Google’s business strategy. Kevin was confident that the amenities of restaurants and other services in the building and others like it (i.e. Atlantic Wharf) will result in best tenants and highest values for their buildings. I really appreciated his presentation, even if it diminished teleworking, which I reckon is a major force. I agree that people still need to work together, and I’m enjoying finding the ways to enable owners to make their space the best for their future tenants (via BlastOffice).

There were a lot of other presentations – modular construction practices, where Boston fits in the global real estate market, and an academic comparison of monocentric to policentric cities by professor Bill Wharton. I caught up with Donna and other alumns during the lunch break. It was great to hear about their many projects and to talk with them about the future of office space. I will be following up with a couple of them on how to solve the logistics issues I’ve encountered. What a great group! (Donna, Daniel, Kristy and Rimi)

The afternoon held more great components of the Forum. MIT collected a group of luminaries from across the globe – including Turkey, Mexico and China – to present on what the new global investor is looking for. I am sure there is a better synopsis somewhere else [nothing seems to be posted yet, but let me know if you have seen anything, thanks]. Great perspectives on those countries. I enjoyed talking with Emre Camlibel afterwards, learning about the amazing growth going on in Turkey. There are 40 high-rise office buildings in the whole country, an $800M economy!  Qian Wang from China had great stories as well, about third-tier cities with almost 10M people…

After a “Lightning Round” of presentations about legal cases that are moving through the courts and will affect real estate development, the day closed with a series of finalists in a case competition. Both the legal cases and the development cases were very illuminating to me. The development scenarios were to develop Pier 38 and the adjacent area just south of the San Francisco Giants stadium in the “Mission Bay” area of that city. Student teams had put together a plan for the 20+ acre site since Monday, and had gone through and elimination round earlier in the day. Some of the judges were actual members of the Giants’ board. The final presentations were polished and the projects diverse. All were mixed-use, all had to handle game-day parking, all had to provide 5 acres of new parkland for the city, and each had gone in different directions. I caught up with the winners, from Toronto, at the end-of-day cocktail reception. They had really put together a great project with a good sense of the market demand for their offering. I was psyched for them, and hope to get involved in a similar case presentation sometime in the near future. The reception was at the top of the Federal Reserve with great views out across the city in both directions. The best surprise of the day was to realize that MIT’s mascot is a beaver (it was on the prize for the case competition), same as my alma mater, London School of Economics. Great minds think alike!

Peter Campot of Suffolk Construction described how behind the times construction is, and as manufacturing and BIM come into play, buildings will finally achieve construction efficiencies that the auto industry figured out a hundred years ago. He finds it mindboggling how people still look at first costs of energy efficiency projects and design choices that will have such good paybacks. People seem to not believe the math. He also sees the future as iPads, wireless, and did not know where offices will need to be in five-ten years.

Kishore Varanasi at CBT Architects talked about the need to get beyond individual buildings and to look at the ecology of buildings in a neighborhood – creating “interesting fabrics” in “superblocks.” He noted that millenials are driving 33% less than the prior generation and want live-work areas like Kendall Sq. Inside offices, younger workers are fine with a reduction of personal space. They want food, team space, and multiple environments for multiple types of activities – like at home. Incubator spaces demonstrate this, and he observed these are no longer “leftover” spaces, but central to the vibrancy of cities and enterprises. We need more.

John Hannum of IBA/Viridian talked about energy efficiency changing the way people work and the cost of space, and Dan Ryan of Pegasystems talked about facilities managers  who don’t get feedback from their employees about sustainability, that it is customer-driven. Peter Calkains (Forest City Boston COO) talked about buildings being flexible to handle changing technology and how teams are collaborating more to produce quality product. Jonathan Rosenthal at Meredith Management talked about his Fenway air-rights project and getting the neighborhood on board with some enticing solar panels (among other things). Dan Ryan closed the session wondering aloud about mobile technology and if people even need office space.

I found the morning very wide-ranging, packing a lot of diverse perspectives into a short conversation. But many good nuggets of observations about commercial real estate. I met a lot of good people, even a couple of leads. Always good to network at these things!

Norris quotes Robert Schiller: “Just last week, Robert Shiller of the Standard & Poor’s/Case-Shiller Home Price Index made the dramatic statement that, with our growing shift to renting and city living, suburban home prices may never rebound in our lifetime.”

There is a population of young people, the peak of the cohort is 22 right now, we call Generation Y. Social observers and planners are noticing they are moving to cities at greater rates than previous generations. There are some major reasons suggested by Norris: they want more adventure than the static suburbs they grew up in. They need the connectivity and serendipitous interactions that occur in dense areas, rather than their managed, play-dated upbringing. Young people want the convenience of urban cores where stores, entertainment, etc are readily available without needing to drive. And this entire generation is averse to cars, to wit: General Motors has hired the marketing arm of MTV to try to get young people more excited about owning and auto.

The article is focused on the residential dimension: where will people live and is basically responding to the Schiller remark, which made waves in the suburban residential brokerage market. I believe the same forces are going to dramatically challenge suburban commercial real estate. If crime and schools can be taken care of in cities, young people will remain in these denser mixed-use areas, and the need for suburban office parks will transform. Of course many owners will re-position assets, and it’s not like the burbs are disappearing overnight. But the trends are significant and the long bet is on the return of the city as the locus of economic activity. The car-dependent suburb will have to adapt to meet people’s needs for saving time, stimulation, and a long-term sense of community.

Why Generation Y is Causing the Great Migration of the 21st Century”

As proud members of the US Green Building Council, Lee Partners participates in the local Massachusetts Chapter here in Boston. Yesterday they hosted their fifth annual Earth Day dinner, to gather and celebrate Innovations in Design and Green Building. I bumped into some good colleagues and made some new connections. The Chapter has a great group of enthusiastic real estate professionals.

The event was at the large conference room of Space with a Soul, a coworking center for non-profit organizations. They are on Summer Street in the “Innovation District” of Boston. This picture is looking west at the Back Bay – you can see the Hancock Tower and Pru on the left. The location is a great way for small organizations to efficiently use office space – a month-to-month commitment and dedicated space at a reasonable cost.

Winners included Harvard’s Blackstone South project and Devens (MassDevelopment) Sustainable Housing. More on the event can be found here. The submission posters will be on display in the Gallery at Atlantic Wharf until June.

[byline: Bruce Lee; above: 101 Main St Cambridge (Photo by Rofo.com)]

On March 29th I attended the celebration of The Indus Entrepreneurs (TiE) Boston’s move to the heart of Kendall Square for the inauguration of the new TiE-Boston Cambridge office. This was an outstanding networking event featuring a TiE Boston Charter Member and renowned speaker – Venkat Krishnamurthy – also a serial entrepreneur and Oscar Award Winner. Prat Moghe, President, kicked off the meeting explaining that the TiE-Boston chapter was started in 1997 and it consists of 150 members and 27 new members since the beginning of last year. The overall TiE organization has 57 worldwide chapters and 12,000 members.

The new President explained that the organization will focus on three areas for
2012. First is to focus on new entrepreneurs in the Cambridge area – students and bright people. Using social media and hands-on mentoring from existing TiE-Boston members, they want to work where “we can really help” take start-up entrepreneurs and their organizations to “real company” status. Second, TiE-Boston will recruit new members. Third, they want to expand the TiE network – and the new location provides accessibility to the Boston-Cambridge neighborhoods so chapter members do not have to drive to the suburbs for meetings etc.

The by-words for this year are to “Focus, Expand, and Engage”. In addition to the entrepreneur presentation by Venkat Krishnamurthy, Jit Saxina (former founder of Applix and Netezza) provided additional support for the move of the TiE office from the suburbs to Cambridge – and gave an impassioned speech on the value of successful entrepreneurs for the benefits they provide all societies – locally and throughout the
world. Vanita Shastri, Executive Director, explained how the new office was working out for the staff and praised everyone for making a smooth transition into the new office.

Venkat Krishnamurthy then spoke of his successful experiences becoming a serial entrepreneur – starting out while at Stanford University and earning an Oscar for his pioneering work with 3D scanning software in the movie Star Wars – to other various successful start-up ventures. This was quite a night with much helpful advice and ample networking accomplished by all.For Lee Partners, it was especially rewarding to hear the positive comments relating to the Cambridge move – since we represented TiE Boston throughout the extended search and negotiation process that resulted in securing their headquarters office space at 101 Main Street, Cambridge. It was a real pleasure to work with Vanita and Prat throughout the process.

One of their major statements is that office workers will continue to prefer office environments over alternatives. I think this is certainly obvious, but they decline to explore the growing trends away from straight offices. Actually, they explain the rise of “Alternative Workplace Strategies” (AWS) where firms are exploring new ways of managing space in order to use less total space for their employees, but do not note the readily available alternatives.

The rise of serviced offices and coworking spaces demonstrates the need for a wider array of options for real estate professionals. Although traditional demand for CRE is “extending tendrils” of an economic recovery, companies are continuing to prioritize cost-cutting and that includes tightening the belt on office space. Many organizations are realizing that anywherefrom 40-60% of their offices are not used at any given time (according to a CoreNet-Steelcase study). Team spaces and collaborative locations are going to continue to take up more of the CRE footprint as the nature of work changes.

It is an exciting time to be following these trends and solving problems for clients as they look to achieve real value from their real estate expenditures.

It was a great crowd and an excellent group of speakers. Dave Martel, Exec. Director of Transition Services and Cushman & Wakefield led off with some great observations. The financial district is 12% vacant but below the 20th floor, it is 23% vacant! He noted that tenants don’t have a lot of imagination: if it doesn’t show well at first, you’re dead. Upper floors are really in good shape. In 2010 we saw an historical shift of best, highest rates, going to Back Bay for the first time. What will be next? He is sure big deals are coming to the CBD as this is where the value for money is.

Brian Chaisson is the Regional Director for Boston at Tishman Speyer and he went over the history of the building and the renovations. Does anyone know a user of 55,000sf floor plates? Esp. in this one, with lifestyle amenities – people do spend a lot of time in their office buildings. Users are looking for operational efficiencies and lifestyle efficiencies – thus the sport club, conference facilities, retail inside the building, and esp. the roof deck. Sam Schaeffer, the senior director of leasing at Tishman, also chimed in and I actually spoke with him for a while later on – great guy!

From Eastdil Secured, Jim McCaffrey noted that owners need the $45/sf rate since transactions costs are from $25-$40/sf.  He is confident that the Financial District will continue to be a good place for business. The quantitive easing going on in the global economy means there is loads of capital sloshing around looking for safe assets in low-risk markets like Boston. Investment sales may be ahead of leasing right now, but it will come back and we will see rents of $50-55 throughout the city. Also driving this attractiveness of downtown space is the new generation of workers who want urban 24h cities. No one is going to 495 he declared.

Fred Kramer at ADD Inc, a design firm, chimed in to say how new workers are a generation about intersection: of work/life, of commerce/recreation, of technology/authenticity. They want to be where the action is. They like coworking environments. Dave Martel picked it up – let’s brand this area for young urban workers. Small firms can’t hire, can’t retain young workers in the burbs. Innovative businesses need to be in the city for the talent. And that Seaport District is still a seaport – there is no where to eat over there. The Financial District is the real Innovation District in Boston.

We went up to the roof deck for some serious appetizers and a couple of drinks. I joined Dave for a conversation and we talked about flexible office space, how can the city work with the innovation branding. One of his colleagues, unfortunately I can’t remember his name, was asking where all the young techie workers are going to come from (where are they going to live: the new condos going up are $2000 for a 1BR). Dave thinks the market will take care of that.

I met a bunch of good people and will hope to stay in touch with these good NAIOP folks. Some of them will be able to help Lee Partners with some leasing deals for innovative agile small businesses. Thank you to Elisif the photographer at NAIOP who took these great shots – did you see me in the first pic – rightmost seat in the fourth row? I hope I can visit that roofdeck again!

Maastricht University academics produced a great report that should support asset analysts and investment decision makes who are looking for a leg-up on competition. “We document that the greenness of REITs is positively related to three measures of operating performance – return on assets, return on equity and the ratio of funds from operations to total revenue,” say Piet Eichholtz, Nils Kok, and Erkan Yonder, has numerous scientific conclusions supporting green REIT preferences.

They continue from previous research that determined: “The general evidence indeed shows positive financial effects associated with better environmental performance. For example, commercial buildings with energy efficiency ratings command significantly higher rents, higher and more stable occupancy rates, and higher prices than otherwise comparable conventional buildings (Eichholtz, Kok, Quigley, 2010; Fuerst, McAllister, 2011). On the other hand, lower levels of energy efficiency and sustainability have been associated with an increased risk of obsolescence (Kok, Jennen, 2011).”

Although the paper is a couple of months old, I thought it would still be very useful for folks to review. I always enjoy a good academic article supporting the intuitions I have from my gut!

In Summary:

GSA is committed to sustainability. The real estate industry has turned the corner: 20-30% of firms have embraced the concepts. It is no longer an early-adopter phase. Total adoption is on the way.

Corporations that embrace sustainability discover side benefits:

• Costs reductions (20% less than market in the case of the GSA)
• Integrate disciplines to drive waste out of the system and create a better product
• The younger generation in the workforce wants to work in buildings that are simply “doing the right thing”

GSA is a leader in the effort to use property more effectively. 50% of office space is empty at any given time. Sustainability is a framework for driving costs out of the portfolio.

It is great to hear such a bona-fide entity, the GSA, championing the cause. It really does make sense.