Commercial space emerges as new real estate frontier for legacy business brands
By Terrance Thornton | Digital Free Press
As the siren call back to commercial space known as ‘office, retail and restaurant’ infiltrate the work-from-home tranquility many modern American employees have stumbled into — banks, brands and property barons say they are finding new ways to use old brick-and-mortar.
The demand for office space — no matter the underlying zoning, locality or hip and creative usage — is at historic lows, officials from across the commercial property sector report.
In the first quarter of calendar year 2023, office leasing activity across the country declined 23% meanwhile absorption rate across American commercial sectors has been negative for 11 consecutive quarters and the national office vacancy rate is at 18.6% or up 60 basis points from the end of last year, according to the latest market report at Cushman & Wakefield.
As commercial office space data points dip below 20-year averages, officials at Cushman & Wakefield report while positive trends were being realized toward the end of last calendar year the rise in federal interest rates coupled with emotional state of fear regarding future economies of scale is stalling the industry.
However, a bright spot in commercial space emerging here in the Valley of the Sun and across the nation is a growing need for industrial space to serve the reality of digital commerce. Due to a rising population, healthy economic growth, and surging e-commerce sales this scenario is barring out here in the Phoenix metropolitan area, Cushman & Wakefield officials report HERE.
Commercial space: COVID-19 forces evaluation of operations
Todd Sanders, Greater Phoenix Chamber president and CEO, told the Arizona Digital Free Press the local business advocacy entity took a hard look at its own operations in regard to commercial space needs.
“The Greater Phoenix Chamber moved offices during the COVID-19 pandemic to decrease its overall office space and restructure to a more collaborative hybrid setting. Our new office has no individually designated offices,” he said. “Instead, we have open spaces for staff to reserve for meetings and focus time. Our new premises is centrally located at the Camelback Esplanade building in the Biltmore area of Phoenix and offers convenient parking and numerous dining options nearby.”
But for Mr. Sanders the work-from-home trend is here to stay as it makes good sense for employees who commute.
“With inflation and high gas prices, employees appreciate working from home a few days a week to elevate their work-life balance, decrease burnout, and save on transportation costs,” he said. “However, all employees can work in the office if they choose any day of the week.”
From a macroeconomic perspective, population growth and key burgeoning industries here in the Phoenix metropolitan area are making the transition to the ‘Digital Age’ less painful for some, Mr. Sanders explains.
“Our biggest industries in the greater Phoenix region remain healthcare, education, manufacturing, construction, financial services, and tourism. Many of those types of companies need a brick-and-mortar store, office, or location,” he said of the legacy standards for brick-and-mortar that still make good economic sense.
“We’re also seeing small business growth in Arizona; many want physical sites. Coming off large events like the Super Bowl, WM Open, and Barrett-Jackson, we saw the tourism, hospitality, and service industries do very well this past spring. The data is clear that although local businesses are concerned about inflation, they remain optimistic because we’re seeing so much growth.”
Commercial space: from branches to service centers
Gary Bernard, who has been employed by TruWest Credit Union since the days it served as a credit union for the Motorola Co. — which is the impetus for most credit unions to have ever been created.
A total of 41 years later, Mr. Bernard, today, serves as executive vice president and COO at TruWest.
“I have been here so long, I used to be the guy with a briefcase going from cafeteria to cafeteria,” he said during a phone interview. “I started as a teller. It has been nice to see how much in banking has evolved, it has been a very rewarding career.”
Mr. Bernard explains TruWest Credit Union is beginning to transition into the next chapter of customer service transforming brick-and-mortar branch locations into service and help centers.
TruWest Credit Union has 10 locations throughout the Phoenix metropolitan area.
“It is all going toward mobile banking,” Mr. Bernard explained of how American consumer demands are evolving in the 21st century. “I started doing this 41 years ago and I can guarantee there was nothing of this sort of thing contemplated. Banking has been changing quite a bit and just like other financial institutions, we have seen a decline in people visiting our branches.”
Mr. Bernard explains fewer folks coming to local credit union branches does not hurt the bottom line, but brick-and-mortar assets ought to be better utilized, he says.
“We have seen and realize, since the pandemic, the emergence of mobile banking,” he pointed out. “We have seen our mobile banking users increase by 24% year-over-year and routine transactions have steadily declined. These types of advancements have reduced face-to-face meetings.”
But Mr. Bernard contends all business is local and the local credit union is a place that prides itself on attentive customer service.
“The community engagement piece, that is picking up for us,” he said. “The one thing that I have noticed with the decline in brick-and-mortar is our branches are evolving into customer service centers. The physical presence helps to foster a sense of trust and connectivity. I don’t see brick-and-mortar going away completely for banks, but I do see a smaller footprint as we move forward.”
