By: Felipe Rivas
2 min read June 2020—Shrinking office space has led companies to focus more on the rehabilitation and renovation of Palm Beach’s office space. Angelo Bianco, managing partner of Crocker Partners, walks Invest: through the main trends in the office niche, how it imbues sustainability and resilience into its projects and why Boca Raton is the buoyant business center it is today.
What is your take on the evolution of the office sector in Palm Beach?
Palm Beach County’s office market has not changed as much as others. Office users by and large have not changed. Even considering new trends such as co-working spaces, it makes up a small fraction of our portfolio. We have observed tenants in Palm Beach County making an effort to reduce their square footage per employee, parallel with technological advances. The need for law firms to have file storage, for instance, has declined dramatically. We still see the desire for private offices and a significant portion of traditional office use. Some companies have switched to open offices, but the pendulum is swinging back even faster now due to the pandemic. The trend to create more private offices and more square feet per employee will offset the impact from the other trend we expect following the coronavirus crises: more telecommuting. Although technology has changed the need for space, the human condition has not changed. People still appreciate privacy and separation from their co-workers.
What primary factors explain these preferences?
Our Palm Beach portfolio consists of 3 million square feet of office space. Most of our tenants have renovated their space over the past 10 years. Even though firms have grown since the 2008 crisis, their footprint has not gotten larger than it used to be because they use the same office space much more efficiently. Shortly before the coronavirus crisis, we reached the point where employment gains fueled by the longest economic expansion in our history backfilled the space lost during that last downturn.
We are on the cusp of a new disruption with the COVID-19 pandemic. The good news for office landlords is that tenants have already reduced their space needs per employee significantly and during this past economic expansion have not taken additional space for growth. Although some office tenants will be significantly impacted by the pandemic, office tenants and their landlords should be in a good position to weather this storm.
How do you view the residential and industrial sectors?
During the first 10 years of our company’s existence, we developed and invested in many property types: hotels, multifamily, retail, office and industrial. Over the years, we specialized in office buildings primarily and although our business has done quite well as a result, the over concentration in one product type has prevented us from participating in the significant growth experienced in multifamily and industrial property over the last 10 years, particularly in Palm Beach. Despite the recent impact on the multifamily market, we believe that this sector will continue to benefit from the constant inflow of people moving into the area who require housing. This is the same reason that we are bullish on industrial. The Southeast region of the United States is an area that continues to see fast-paced growth in employment and population so investing in front of that is critical.
What is your assessment of the up-and-coming Boca Raton market?
Boca Raton is by far the biggest employment base in the county. It dwarfs any other market. If you took all the office space in West Palm Beach and doubled it, you would still fall short of where Boca Raton is positioned. It has been a business hub for decades and will continue to be an attractive place for companies to headquarter. The quality of life is phenomenal, plus it has an unparalleled access in Palm Beach County to an incredibly well-educated, well-informed workforce. This is part of the reason we have been headquartered there for 35 years.
What is Crocker Partners’ outlook for 2020?
2020 is going to be a muted year. Any noncritical, ongoing investment project is likely to be delayed until 2021. Everything has stopped dead in its tracks due to the COVID-19 outbreak. Regardless of when businesses restart, it takes time to remobilize, meaning projects will not realistically recommence any sooner than 4Q20. The delay will be made worse by the fact that everyone will want to restart their projects at the same time. By Q121, we expect to be back to business as usual. We expect to spend much of the remainder of 2020 focusing on ensuring a safe workplace environment for our tenants. In April, we formed a Remobilization Task Force headed by our director of construction and development and consisting of senior regional managers in consultation with our vendors and contractors to review and implement governmental and industry guidelines and evaluate best practices and potential capital improvements to facilitate a healthy work environment. We are also in the process of hiring a full-time director of environmental health who will absorb the responsibilities of the Remobilization Task Force on a permanent basis and research and implement physical changes and protocols with the hope of making our buildings the paragon of environmentally health and safety in the industry.
To learn more about our interviewee, visit: https://crockerpartners.com/