As leaders in CRE tech and building measurement, Real Data Management surveyed a large sample of brokers across the United States in order to gain insight on the recent BOMA 2017 measurement standards. Our objective was to understand the overall awareness and sentiment of BOMA 2017 and its impact on the market.
Questions we sought to explore for the Midwest region include:
- Are landlords in the major markets re-measuring their buildings based on the new BOMA 2017 standards
- How quickly will building owners adopt the new BOMA 2017 standards?
- Which markets expect to handle the potential increase in inventory/RSF?
Midwest Market Awareness of BOMA 2017
The region we are calling the Midwest includes the markets of Chicago, Dallas, Houston, Minneapolis and St. Louis. These cities were chosen for their high density of Class A and B buildings
Brokers Polled in the Midwest Region
The brokerage community we reached out to in the Midwest were first asked about their awareness of the new BOMA 2017 standards – if they heard of the changes and if so, have they started discussing the impact of these changes with building ownership. Our survey results were split 59% unaware of the new BOMA 2017 and 41% aware.
State of the Current Market
Our next point of investigation was relative to the amount of BOMA 2017 activity our brokers were seeing in their pipeline. This can be explained with three different data points:
- Are there any deals in their pipeline that are using the new standards?
- Are they aware of any owners re-measuring properties?
- Will the buildings that these brokers are currently responsible for, or working with, transition in the near future?
BOMA 2017 Deals in Pipeline
Out of the people who responded to our survey only 31% are currently seeing deals using the new standards, but this will likely grow as time goes on and landlords begin to see the market adopt the new methods. In the Midwest a lot of the market is still unaware of the BOMA 2017 changes and as that number changes we expect the deals to increase.
Breakdown of Deals in Pipeline
Out of the group who have deals in the pipeline, our survey showed that some owners are planning re-measurements using BOMA 2017. Fifty-six percent (56%) of all brokers in our Midwest cohort are aware of at least one owner re-measuring. Brokers that represent both tenants and landlords reported the highest number of BOMA 2017 deals in the pipeline. We anticipate that as time goes on both brokers and landlords will be looking for ways to leverage BOMA 2017 in their negotiations and will likely inquire more about the re-measurement techniques used.
Future of BOMA 2017 in Midwest Markets
Though the majority (76%) of brokers in our survey reported that owners will not switch their buildings over, this is not representative of the long-term attitude, but rather for just the immediate future. Many owners will wait to see how the market adapts before switching over their buildings to BOMA 2017, and even then it will only be if there is growth to be gained.
Owner’s want to make changes at a slower pace to see how much benefit they get from re-measuring and how much price push-back they will get from tenants renewing leases. They are aware of the fact that not all buildings will benefit from BOMA 2017; some can actually shrink if the previous method of measurement was too aggressive, or can go unaffected, resulting in a net loss due to the money spent on re-measuring.
Likelihood of Owners Switching Over
The Market Temperature
The previous two sections revolved around what the brokers we questioned knew and what they were hearing. In this section, we will discuss the likelihood that the new standards will be embraced and put into common practice, as well as the most important question: will the market bear a potential increase in building size?
Based on our survey data, 72% of all brokers in the Midwest believe that BOMA’s new standards will eventually be accepted. This implies that regardless of initial resistance or acceptance, owners and consequently, lessees will eventually embrace BOMA’s new office standards.
In regards to market acceptance of BOMA 2017, tenant brokers are largely in the belief that it will not be accepted, whereas those that represent both tenant/landlord as well as landlord-only brokers trust that BOMA 2017 will be accepted.
BOMA Acceptance Breakdown
Overall Market Insight
The most asked question is Will the market bear a potential increase in square footage as a result of the new BOMA standards? The answer from our sample of Midwest brokers was almost split down the middle, but slightly favored positively.
It is expected that Owners will continue to become aware of when BOMA 2017 can bring growth to their buildings, which means that buildings will likely grow across many different markets.
How will tenants respond to this change? As we can see, this graph follows a similar trend to BOMA’s likelihood of acceptance.
Considering the feedback with the new standards in place for a short amount of time, it can be surmised that the new BOMA 2017 standards will be considered moving forward. At a minimum, it is being seen that landlords are investing in the re-measurement as part of their due diligence to understand the impacts on their individual assets and their values, should the standards be implemented.
The next 18-months will be extremely interesting when viewing the conversion over that period of time. Look for RDM’s follow up survey to come full circle on the final impact.
We previously published our survey results for the South region. To read more please visit our article about the South here.
To explore your growth potential with BOMA 2017 try our Value Calculator.