The changing face of office space

There was a time not too long ago in the past (although nowadays ‘long ago’ can mean yesterday) when people congregated during the day in what was then called an office.

Ideas would be exchanged, lunch would be had, art work was hung on walls and the workspace was a source of interaction and inspiration. Way back then (1995), when calculating square footage for an office, the required area was based on 280 square feet per occupant. The number was the totality of the actual office that the employee would occupy plus their share of corridors, reception, kitchen, etc. Those variables have all been tossed out the window (oh for the days when each office had one) as home working and rationalization of space became the buzz words in the industry. Aside from outsourcing to third world countries and increasing Canada’s unemployment rolls, many people now work from home. Often this is at the behest of the employer, other times it allows the employee to save money on day care, office attire, transportation, etc.

While appearing to result in an improvement to the corporate bottom line, the true collateral damage is expressed in multiple intangibles. From a landlord’s perspective, an office that employed twenty people would result in a lease of five to six thousand square feet. With today’s re-jigged per employee calculation a mere 170 square feet per, the same office requirement is now 3,000 to 3,500 square feet.

Part of the rationalization for the rationalization is based on shared desk space, either as a result of split shifts or a single work area. Demarcated by sound and light absorbing panels, cubicles created are more suited to Skinnerian experiments with rats than as a work place. Alienation comes from both the physical segregation brought about by the new work stations and, more importantly, as a result of flat screen fixation. In today’s uber-connective world, we e-mail or text an individual who may be five feet away. Is this normal? Is this healthy?

As a man with a passion for progress, I see a positive pendulum shift in the offing. Co-working will be the new buzz word; trust me. It allows for a common open area rife with individuals working on both solo and collaborative projects. Large tables and work areas become shared spaces. No dividers. If an person wishes to collaborate, he simply talks with his neighbour. Conversely, there are ways of tuning out. I prefer Sennheiser earphones and an on-line streamed eclectic radio station.

It is our hope that people de-isolate, come together and share space. The collaborative financial and social benefits of being surrounded and inspired by others are worth more than the rent and labour savings if our common goal and desire is to personalize rather than isolate.

For Once, the Light at the End of the Tunnel isn’t a Train Coming at us

As a lifelong Montréalais and full time supporter of one of the world’s great cities, I am delighted with the sudden change in atmosphere that is a direct result of the recent provincial election result. From the very next day, there was a sense of relief that could be felt walking down the street. People were smiling, the sun was shining and it felt as if the city had been woken from a bad dream.

Within 24 hours our office phones were ringing with potential customers ready to proceed with leasing deals. All talk among friends and family discussing their relocation plans stopped being the main topic of conversation. Instead of looking to escape, people are looking to move forward.

With a new Mayor and a new Premier, I hope that we will get our streets fixed, our taxes back in line with the rest of North America and that world business will look to us as a potential place to expand into, rather than a place to run from.

A renewed positive spirit, coupled with political will and proper planning can return our fair Montreal back to the world class city that was its promise back in the 60’s and 70’s. Who knows, we may even end up with a baseball team one day.

Has 40 years of Wandering in the Desert Finally Come to an End?

Montreal is one of the greatest cities in the world. Last November’s election of Denis Coderre, a self-proclaimed ‘new sheriff in town’ brought competence, vision and a strong sense of economics to the fore. Add to that yesterday’s resounding provincial election of Dr. Couillard and his majority Liberal government, and a palpable sense of relief and optimism has been produced overnight.

Two governments have been elected, which truly represent the will and sensibility of the majority of Quebecers and Montrealers. Our metropolis, the only true bilingual (multilingual?) city in North America has long since grown up, eschewed, and come to terms, nay – embraced the realities of globalism and multiculturalism. Our elected officials in the provincial legislature now reflect the cultural cross-currents which define ‘la réalité quebecoise’ of the 21st century.

I recall the halcyon days of the ‘Montreal Decade’, bookended by Expo ’67 and the 1976 Summer Olympics. We were imbued with a spirit of optimism and a sense that Montreal was in ascent, only to be rent asunder by subsequent elections that pitted citizens against each other to determine the future direction of Quebec – become sovereign or remain part of Canada. The resulting four decades produced a loss of talent, a loss of economic growth and most sadly a loss of spirit. Hopefully the recent electoral results will allow old wounds healed years ago not to be picked open again. My wish – Quebecers and Montrealers will join arm in arm to reclaim our rightful global exemplar as the ultimate synthesis of economic, lifestyle and socio-political well-being.

Along came Mural

This past weekend Montreal in general and St. Laurent Boulevard in particular, was host to an internationally renowned collection of Urban Artists. Formerly known as graffiti punks, these talented artists bring a fresh perspective and nuance to exterior structures. Their artwork reflects social issues, whimsy, fantasy and historic interpretations.

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As the world moves forward it is incumbent upon those of us with access to public ears and eyes to allow for the creativity of the up and coming citizenry and artists to have a venue in which to express themselves and their ideals.

Our beloved boulevard has fallen on hard times over the past five years. The first major downturn was a direct result of the “improvement” to the streets and sidewalks. A plan was unveiled by the city of Montreal to turn The Main into a stroller’s boulevard. Wider sidewalks, increased greenery and a focus on culture was the desired result. Instead St. Laurent was victimized by delays, inefficiencies and incompetence. Parts of the street were dug up three times – once for the substructure, then for Hydro Quebec and a third time for Gaz Met. The bumbling inefficiency was overseen by incompetent local bureaucrats. The work was undertaken by those whose names have now become household words thanks to the findings of the Charbonneau Commission. Property taxes have skyrocketed in direct inverse proportion to municipal services, rendering the street, which was Montreal’s golden child in the 90’s, into a semi-ghost town with the windows of vacant stores looking like vacant stares.

And along came Mural. These four highly talented and ambitious young men took it upon themselves to propose a project that would involve turning our moribund boulevard into an ethereal canvas offering passersby a ticket to visual paradise. The Société de development de boulevard St. Laurent immediately recognized the need for a visual version of CPR and jumped at the opportunity. This past weekend it hosted thirty artists, both local and international to ply their trade on many of Montreal’s better known brick canvases. The street was closed to allow gawkers their due. There was gawk-a-plenty going on.

We thank the hard working volunteers, crews and the rest of the team that provided logistics and support to the event, which is slated for, as they say in politics, four more years. But these will be a good four. The relevance and re-emergence of the street over the weekend was palpable. The opening event hosted such Montreal notables as Guy Laliberté and Louise Harel. Two most diverse individuals probably do not exist in this city, but again, St. Laurent Boulevard showed its magic ability to act as a world class meeting place for those of all stripes. I encourage all Montrealers who are in a need of a dose of civic pride (and these days who isn’t?) to head down to The Main, enjoin the culture and, if you feel like it, buy something from a local merchant – their rent is due in a couple of weeks.

Two Furniture Stores and a Microphone on the Main

Loft Offices: Coming of Age

Do you remember back in 1980 when Elvis Costello, festooned in narrow leather tie and black Converse high-tops, was considered a counterculture punk? Fast forward thirty years and he is mainstream – married to jazz diva Diana Krall and hosting a variety show Friday nights on CBC. The commercial loft business has followed the same trajectory within a similar time frame.

In 1980 occupancy levels of Old Montreal and the Plateau buildings were beginning to show signs of the decline of the manufacturing sector as the first lines of imported garments found their way to our shores. Single story, multi-tenanted industrial properties with high ceilings and individual loading docks became the norm for the companies as they transitioned away from local production. The resulting change of business model led to substantial vacancy levels with no takers in site.

Through what, in retrospect seems to be divine providence, the demise of the old economy businesses dovetailed with the emergence of a nascent group of industries that have ultimately become the vanguard of Quebec’s new economy. Tenants seeking commercial loft space in the ‘80s were fashion designers, graphic artists, photographers and members of what is seen today as creative commerce. Their need to occupy loft buildings was not born from a desire to have cooler spaces featuring hardwood floors, exposed brick and open ceilings. The motivation was simple – cheap rents. The pioneers had spirit, creativity and ambition. What they lacked was money. The loft business developed as the only logical response to market conditions on upper level floors. There were no takers for large floor plates as manufacturing continued to dry up. The buildings were not situated in desirable areas for white collar companies. Had traditional office users been prepared to relocate to uncharted territory, the cost to convert loft space to standard office would render the decision impossible.

That was then; this is now. With the paradigm shift created by a new generation entering the business world, coupled with the rise in information and entertainment oriented businesses, what was once eschewed is now in fashion.

Significant change has come to the business model as it has become more mainstream. The notion of Live-Work-Live-Learn and Densification of the Urban Landscape are two dominant themes governing Montreal Real Estate needs. The most significant contribution to the change in the commercial loft model results from the type of developer now purchasing this asset class. Whereas commercial loft properties flew under the radar with regard to corporate acquisitions, such is no longer the case. Throughout North America loft properties form core holdings of several REITs and institutional buyers. Their appearance has altered the playing field dramatically. Two elements in particular have created a substantive shift in the commercial loft business. As highly capitalised companies enter the game, the return on investment that larger players accept has effectively squeezed the individual owner out of the market. Secondly, in the early days of commercial loft rentals, TI’s consisted of a bucket of paint handed to the new tenant. If they were deemed particularly credit worthy, they might get a brush, too. Today’s TI allowances are often commensurate with packages offered for traditional office space. Air conditioning did not exist in the early model. Windows that opened were desirable since fresh air blowing in off the mountain was sufficient. Today, sophisticated HVAC is considered base building and a lack of air conditioning is a non-starter, particularly as server rooms and computer generated heat becomes an important consideration.

The elevated consciousness of loft users has sped up the creation of green and LEED type buildings as tenants require recycled materials and energy efficiency in their buildings. No self-respecting loft building lacks a bicycle rack or Bixi access.

The niche for commercial loft users who reject the more corporate environments traditionally associated with the CBD continues to grow. Montreal has evolved a doughnut shaped environment when it comes to loft sectors and nodes. The south west, Griffentown, Le Plateau, Mile End, Rosemont/Petit Patrie have all become hotbeds of creativity as their old industrial buildings become recycled cradles of 21st century industries such as gaming, software and app development, on line services, design, etc. Look for growth in the Hochelaga-Maisonneuve, Villeray, Verdun, Pointe St. Charles and St. Henri corridor as this phenomenon continues to expand.

Typical leases are in the 1,000-5,000 square foot range. Many clients are coming out of their basements and loft space represents their first venture into the outside world.

To that end, the question of financing loft buildings poses a unique set of challenges. Most users are well below credit grade. At first blush one would think that typical lenders would shy away from mortgages supported by start ups, and small, non-traditional users. In actuality, a loft building should be presented as being similar, in terms of risk, to an apartment complex. Because of the relatively large number of tenants occupying a property, coupled with the fact that rarely does a tenant occupy more than ten percent of a building, the risk of default is significantly less than in a traditional office building filled by two or three lead tenants, the collapse of any of which could spell financial disaster to the borrower.

In the world of loft space, the greatest challenge is keeping up with the ongoing changes in user requirements of individual tenants. A start up can go from 1,000 square feet to 15,000 in two or three years. Conversely, a firm that has lost its mojo can let go three quarters of its staff overnight and shrink from 5,000 square feet to 500 in a matter of minutes. Elastic walls would make management easier but instead a greater attention need be paid to monitoring tenants activities. Changes in paying habits, increased hiring, need for additional electrical circuits or air conditioning can be a tip off as to what is to be expected in the near future. The proactive manager communicates regularly with their tenants with an eye toward being able to relocate and shuffle tenants on relatively short notice.

The commercial loft market is here to stay and is already segmenting itself into A, B, and C classes. More so than traditional buildings, the importance of social media via Facebook, Twitter, Linked In and others drive the demand for space. Staying ahead of the curve and paying attention to trends will allow the commercial loft building owner to keep his property full and help improve the dynamism of the local economy. Pump it up.

A field day for vendors

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Last week I attended a Strategic Partners Conference in California hosted by Time Equities, a large privately held Real Estate company based in New York. They are Antrev’s longest standing and highly valued client. The conference dealt with current issues facing real estate development and focussed on upcoming world trends and what their effects will be on our business.

Once getting past the mind numbing profits that their company had made in some of TEI’s New York based acquisitions over the previous few years, the focus of the meeting centered on the topic of present day financial markets. General sentiment is that cheap and easily accessible money from traditional lenders will remain the order of the day for the foreseeable future. Low interest rates will continue to result in increased prices for properties. Large institutions such as pension funds and insurance companies and Real Estate Investment Trusts (REITs) have an insatiable appetite to place funds, with huge amounts of capital at the ready. Traditional investment vehicles such as Municipal Bonds, GIC’s, money market funds, etc. are providing such a pathetic interest rate that the risk tolerance has been increased to allow for participation in what used to be called ‘alternative investment strategies’, i.e. Real Estate. The number of dollars chasing each deal has resulted in a field day of opportunity for vendors.

Next episode will deal with the influx of money from exterior sources which are further intensifying purchase prices.

Antrev – Real Estate from a Different Perspective

Welcome to the first blog entry on Antrev’s recently revitalized web site. I intend to share thoughts and views on Montreal’s property market as seen from both a local and global context. A bit of history first. The principal behind the company (that be me), has effectively spent his entire life surrounded by the world of Real Estate. Having grown up in a family of diverse contributors to the industry, be they architects, developers, or brokers, our conversations around the dinner table focused on square feet.

While the lion’s share of Antrev’s business experience has focused on property management, my pedigree includes commercial and industrial brokerage, development, syndication and market development. Antrev reflects the multiple perspectives of my career to date. We have historically approached the business from an entrepreneur’s perspective and the management team in place has well over one hundred years of combined experience. Not to say that we are dinosaurs. Accomplishments executed under Antrev’s mandate include revitalization of some of Montreal’s geographic sectors, innovative approaches to property conversion, reliable property management, and a unique ability to add value to projects through efficient administration, talent, and hard work.

I look forward to sharing our experiences, accomplishments, and observations over the coming months. As a regular contributor to Espace Magazine, this blog does not represent the first time that I have put e-pen to e-paper to reflect on the business. Having had the opportunity to comment both in print and on the podium, I am hoping that this medium affords the opportunity to present new ideas, review and discuss issues important to us all and act as a forum for creative thought.

À bientôt

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