It’s not just offices that are squeezing down space

High-bay warehouse and manufacturing tenants are looking to pare costs as well

The trend over the past five-plus years has been to squeeze into less space. Technology is a big driver of this. The other day, I was looking at some office space with a tenant and we saw several built-in workstations where the desktop computer took up the entire corner. Not so today with laptops, tablets and “big” smartphones.

As tenants seek smaller office suites, landlords are left with the challenge of carving up existing spaces and not ending up with unrentable space. One tenant wanted to “give back” 645 square feet from the current suite, but it was not rentable, as it was not accessible from a common hallway and only had one window. The solution was to move the tenant across the hall to a smaller suite. While this was more initial expense for both the landlord and tenant, it saved both of them money over the new three-year lease term.

Squeezing down space is not unique to office users. High-bay warehouse and manufacturing tenants are looking to pare costs as well. This often means “going up,” using taller racking, which requires greater ceiling height. Today, “high-bay” means at least 20 feet clear, so older buildings at 14 feet and 16 feet clear are less in demand. These often are converted to “flex-tech” space – light assembly, research and development, even administrative.

The global front

On the global front, the U.S. economy seems to be more than holding its own. Most businesses we deal with seem positive. We are six years into the recovery since the Great Recession. Economists and pundits tell us it may be another four, five or six years before we have truly reached full economic recovery. I tend to label this as a tepid recovery – warm but not hot.

The U.S. is buoyed by the weak conditions in Europe, the Russian-Ukraine situation, a touchy Middle East and China's economy slowing down. So relative to the rest, the U.S. looks pretty good.

As D.L. Carlson Group reported in a recent newsletter, “one noted economist observed that expectations we will morph into robust economic growth anytime soon are based on models of the economy we have not seen for a while.”

Nationally, gasoline prices dropped dramatically, leaving extra discretionary dollars in household accounts. But at the same time here in the Northeast, natural gas and electric bills jumped dramatically. So not all energy prices have declined. Recent retail sales data are indicating that the U.S. economy is not seeing the growth that declining energy prices should have produced. So, once again, one step forward, a half-step backward.

Having gone through the past five years of economic stress, we are hopefully heading out of the woods (and no longer heading into them).

As Hillary Clinton is ready to announce, we will see the deluge of candidates heading up to New Hampshire. There are many big-ticket issues in front of us, including health care, education, job skills and training, retirement benefits and immigration. We will hear a lot of talk and perhaps a few good ideas, but translating that into positive action in Washington is not likely.

So as all politics are local, we can focus on improving conditions here in New Hampshire and let others try move to the bigger (and heavier balls) in Washington.

Bill Norton, president of Norton Asset Management, is a Counselor of Real Estate (CRE) and a Fellow of the Royal Institution of Chartered Surveyors (FRICS). He can be reached at wbn@nortonnewengland.com.