The evolving office space trends shaping the future of commercial real estate

The commercial office space market is undergoing significant shifts as it adapts to a post-pandemic world. Office valuations, which have been slipping since the pandemic, continued their decline in 2024. According to data from CommercialEdge, the average sale price of office buildings dropped by 11% last year, reaching $174 per SF, down from $196 in 2023. This decline comes as businesses adjust to hybrid work models and reduce their office footprints, further pushing down demand for traditional office spaces.

The federal government is also facing real estate challenges. The General Services Administration (GSA), which manages a substantial real estate portfolio, has been actively reassessing its needs and has already started trimming its office space. In the Washington, D.C. area, leases with early termination clauses are expected to be among the first targets for cuts, as they provide more flexibility. These measures reflect broader efforts within the government to optimize its real estate holdings, potentially impacting millions of square feet of office space over the coming years.

In the private sector, the commercial real estate market continues to evolve as tenant expectations shift. The rise of hybrid work models, along with economic pressures, has led to increased vacancy rates, particularly in central business districts (CBDs). Companies are looking for spaces that foster collaboration, creativity, and employee well-being, which has led to a demand for high-quality, amenity-rich properties. Amenities such as wellness centers, green spaces, and on-site cafes have become priorities for tenants seeking to enhance their workplace environments.

Developers are responding by reimagining office spaces to meet these changing needs. Sustainability features, including energy-efficient designs, green building certifications, and smart technologies, are becoming more common as businesses prioritize environmental responsibility. At the same time, many older office buildings are being repurposed into mixed-use developments or residential properties, creating opportunities for investors who can navigate these complex conversions.

While the demand for traditional office space has decreased, there are still opportunities for flexible office spaces and suburban developments. As more companies decentralize their offices, suburban areas are seeing a resurgence in demand for well-located office properties that balance accessibility and cost-effectiveness. Investors and developers focusing on these emerging trends are poised to capitalize on new growth areas.

Looking ahead, the commercial office market is expected to continue evolving, driven by changes in work habits, tenant preferences, and environmental considerations. As the market adapts to these new realities, developers and investors must remain agile and open to innovative solutions, including flexible office spaces, suburban office developments, and sustainability-focused properties. While the market may never fully return to pre-pandemic conditions, opportunities remain for those who are prepared to navigate the ongoing changes in the commercial real estate landscape.

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Header image: 46 Penn Centre just off the Country Club Plaza in Kansas City, Mo. Image courtesy of Block & Company

Infrastructure funds connect KC with Google Fiber

“This project for me personally has been a game-changer, and as we’ve seen, it’s been a game-changer for Kansas City,” said Rick Usher, former assistant city manager at the City of Kansas City, Missouri, and founder of The Usher Garage LLC.

The project to which Usher was referring in his virtual presentation to KC Downtowners on September 8, was bringing Google Fiber to Kansas City.

Although it’s been a decade since Google Fiber chose both Kansas City, Missouri and Kansas City, Kansas as the first communities to get its digital symmetric gigabit-speed internet service, the region has an opportunity to apply lessons learned from the Google Fiber project to benefit from the federal infrastructure bill.

“This is really a once in a century opportunity for funding of projects of this scale, so how the cities reacted to Google Fiber, how we worked with them to build out the network, these are lessons learned that can be applied to moving forward as a region with this infrastructure bill,” said Usher.

In 2010, Google Fiber announced plans to build experimental, ultra-high-speed broadband networks and released its Fiber for Communities RFI.  A group of entrepreneurs at one of Kansas City’s co-working spaces (of which there were only two at the time), Office Port KC, began a response to the RFI.

Those entrepreneurs needed assistance and reached out to Cindy Circo, a member of the Kansas City Missouri City Council.  The request made its way to Wayne Cauthen, then the city manager of the City of Kansas City, Missouri, who assigned Usher to help facilitate the response. 

Usher said putting together the response to the RFI was a community-wide collaborative effort, with more than 117 participants contributing to the response.

Representatives from the Kansas City, Missouri proposal team first suspected that they might not be the only recipients of the Google Fiber opportunity when the receptionist at Polsinelli, where negotiations occurred, asked the Kansas City, Missouri city attorney if he was with the Unified Government of Wyandotte County.  

“So we at that point started seeing that it would be two Kansas Cities in this announcement,” Usher said.

On March 30, 2011, Google Fiber announced that it would be rolling out its fiber network in Kansas City, Kansas.  On May 17, 2011, Google Fiber made the award to Kansas City, Missouri.

Usher said there were discussions of a joint announcement.  But, Kansas City, Kansas was able to come to an agreement with Google Fiber more quickly because its Board of Public Utilities was essentially a city department; whereas, Kansas City, Missouri had to work with Evergy.

“On the Missouri side, we were working closely with Evergy, then Kansas City Power and Light, to assist them in really vetting and doing the due diligence on how a privately-held public utility would show benefit not only to the City and the Kansas City region but to their customers and their shareholders,” said Usher. 

Evergy entered an agreement with Google Fiber to allow use and access to Evergy’s utility poles and easements, which Usher said was crucial.

In September 2011, the then mayors of Kansas City, Missouri and Kansas City, Kansas formed the Bi-State Innovation Team, which was charged with figuring out how the region would be able to take advantage of this gigabit network opportunity that Google was bringing.  

“So we got a lot of experience then in how cities can share the right of way, share infrastructure.  As you can see now, Google Fiber and others are partnering with jurisdictions on cooperative agreements, public-private partnerships,” Usher said.

In 2012, Google’s executive chairman, Eric Schmidt, declared that the Google Fiber project was not an experiment, but was actually being run as a business.  Shortly thereafter, Google Fiber announced it was expanding to Austin, Texas, and then to other cities around the country.  

“Today we have 22 cities in the Kansas City region that have entered into agreements with Google Fiber,” said Usher.

Usher said the success of the region’s Google Fiber project serves as an example of the Kansas City region’s history of helping prove new ideas.

With respect to benefiting from infrastructure bill funds, Usher recommends that the region looks to more public-private partnerships with other internet providers to build out their fiber networks.

“We have a really unique situation I think in the Kansas City region on the number of internet providers we have, the quality of the services and the speeds that are offered. So partnering with them to assist any number of internet providers to complete the build-out of their gigabit infrastructure and their fiber infrastructure would be our best investment of those infrastructure dollars,” Usher said.