Opinion: Springfield office market bucks big-city vacancy trends

I am frequently asked about the state of the real estate market in Springfield. Fortunately, despite recent changes brought on by the pandemic and subsequent recovery, the commercial real estate industry in Springfield has been strong over the past 36 months in almost all sectors. With these changes, many companies are facing uncertainty about how to best approach  office workspaces to meet their needs. Here are some reasons I believe the office market in Springfield has positively outpaced larger city office markets.

Since the pandemic, the emergence of remote work has managed to change the way the office landscape functions. The office market in the U.S. has seen a vastly different approach depending on where you are located geographically within the country, and the size of your office market.

Market data
Within the commercial real estate office sector, certain smaller, regional/local markets such as Springfield are defying the market trend and outperforming some of the country’s largest markets with respect to vacancy. As an example, our firm has transacted over 250,000 square feet of office space over the past 12 months. Real estate researchers at CoStar Group recently reported the Springfield office market vacancy rate is currently 4.1% with demand continuing, while larger cities are trying to fight off large double-digit vacancies – for example, San Francisco at 19%; Chicago and Los Angeles in the 15% range; New York, 13.1%; and Kansas City and St. Louis, around 11%.

Competitive advantages
Our community’s competitive advantages have supported extremely low vacancy in our office market through the lower cost-of-living index compared with larger markets, as well as good schools, parks, area lakes and trail systems, all of which bring a quality-of-life component that can be superior to other areas. Additionally, unprecedented construction costs have made the inventory of existing buildings more economical than new construction, creating more demand for existing buildings. Companies, both large and small, research these market attributes while evaluating various areas to do business within.

Fortunately, Springfield is more of a neighborhood office market, unlike that of the larger markets which are usually commuter skyscraper office models with millions of square feet of buildings on every street corner. While there are exceptions to the rule, Springfield is fortunate that the office landscape is situated as it is, and it’s functionally set up well for companies to resume an in-person office environment.

Most medium/smaller office users have returned to the office in communities our size, and with the majority, not all, of the offices in Springfield fitting that size criteria, we are functionally well set up to maintain a high occupancy rate because of the positive correlation between the space size and industries that are back to work in person representing the majority of our office market.

Other factors
Companies attempting to provide a productive work environment as well as allowing for remote work options have faced challenges. While businesses are trying to better understand and adapt to the best models for their staff, with remote work gaining popularity in recent years, it’s not always the most effective solution for traditional and service companies.

Communication challenges, reduced employee interaction, brainstorming and collaboration pose real hurdles that have to be handled very carefully in order to keep on track. According to reports from the Society of Industrial and Office Realtors, the face-to-face interaction, problem-solving, creativity and company cultures can be lost in some cases if communication is done remotely.

Locally, most employers have encouraged workers and employees to return to the office environment. There are various industries where remote work can be more functional and cost-efficient than others. Remote models may pose technological limitations, infrastructure challenges and possible security risks considering a large portion of our workforce lives in rural areas that may have limited firewall protections in their residences. Additionally, we as a community are fortunate that most office users don’t have to make up for lost time caused by long commutes, compared with the larger markets that rely heavily on public transit, subways, rail lines, ride-share services, etc.

Springfield’s success is also due to its economic resilience and stability. Unlike larger markets, we generally maintain consistency and aren’t as subjected to volatile highs and lows due, among other things, to a diversified employment base. Stability and consistency allow businesses to plan more efficiently and be more productive in the long run.

Ross Murray is president of R.B. Murray Co. He can be reached at ross@rbmurray.com.