Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.
Issue link: https://westernrealestatebusiness.epubxp.com/i/732258
42 • October 2016 • Western Real Estate Business www.REBusinessOnline.com WHEN LARGE LAYOFFS OCCUR, LANDLORDS, BROKERS LOOK TO DATA Downsizing doesn't have to spell disaster for landlords, tenants or their corresponding representatives — as long as you have a plan in place. By Nick Romito S an Jose's Cisco recently an- nounced plans to lay off 5,500 employees — 7 percent of its global workforce. If you look at 2016 as a whole, this Silicon Valley giant is not alone. Tech companies in the U.S have laid off a combined total of 63,000 employees this year in a trend some are calling downright "bloody." The West's tech-heavy markets have undoubtedly seen the worst of these layoffs. In addition to Cisco, Se- attle's Microsoft and Silicon Valley's Nokia, Yahoo, VMware and Intel have all shed numbers. The reason for these huge cuts? As technology be- comes increasingly software-oriented, and more data moves to the cloud, old-guard tech ti- tans that have his- torically focused on hardware are forced to rethink their business models. They're looking for ways to make products and services valuable in a wireless world; one that requires a different type of manpower. As technology continues shifting, the labor force will continue to ad- just. As a result, landlords and bro- kers will see a ripple effect as they deal with the reality of suddenly vacant, or increasingly sparse, office buildings. As a former broker, I know the stress this creates for all parties. If a company downsizes before their lease is up, the tenant and, ultimate- ly, a tenant broker, needs to fill the space. This means a unit is often put on the market to sublease — either all of it, or pieces of it. Re-marketing in this way creates costs that the bro- ker likely never budgeted for. In the meantime, the landlord — who you may think is protected be- cause, no matter what, the tenant is bound to pay out the lease — also faces a difficult situation. If that sub- lease is priced substantially lower than comparables, the entire market has a new low price to adjust to (hint: nobody wants to be the low price in the market). And while leases can be crafted to heavily favor the landlord, that may not market well to potential tenants. Landlords and brokers are increas- ingly looking to real-time market data to avoid and mitigate the ripple effect created by large layoffs. The idea is that, with the right data, land- lords and brokers can "layoff-proof" their businesses. One dataset that becomes an im- portant tool in this effort is tenants in the market (TIMs). TIMs data reveals key tenant trends in the market, such as which tenants are being drawn to which areas, how long they're stay- ing, or if and when they're break- ing their leases. The data can also indicate if companies are growing, shrinking or overpaying for current spaces. By analyzing TIMs data, landlords and brokers can build tenant pro- files based on lease expirations, lease Romito