Office Space Advice
Q&A: Howard Ecker Offers Tenant Rep Perspective on Serviced Offices
Published April 24th, 2009 by Jennifer LeClaire
Howard Ecker has his finger on the pulse of the commercial office industry. His company has been representing the interests of tenants throughout the United States since 1975. That means he’s seen the ups and downs, ebbs and flows of the economy and its impact on office space.
Ecker started his commercial real estate career working for Cushman & Wakefield as the original leasing agent for the John Hancock Center. After leaving Cushman, he joined Arthur Rubloff & Co. and became the head of the office leasing department. In 1975, he launched his own firm. His career spans more than 40 years.
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Ecker marches to the beat of a different drum. When others are rushing to make deals, he prefers to take a deep breath and fully evaluate the situation before moving forward. He dares to question the norm in pursuit of seeking the best options for his clients.
aBetterOffice caught up with Ecker, president and CEO of Howard Ecker + Company, a national commercial tenant representation company headquartered in Chicago, to get his take on the executive office suites industry in a down real estate cycle.
You have offices in Chicago, New York, Charleston, Miami, Denver and Detroit. How is the executive office suites industry faring in those cities? Is this trend hotter in some areas than others? Or is it hot across the board?
If companies lay off individuals, many of them start their own business rather than continue to look for jobs. The primary target markets where this hot or the “major markets” are New York, Chicago, Miami, Los Angeles, San Francisco.
What factors are driving the uptick in executive office suites leasing?
In an economy like this the shared office concept always does very well. People are being laid off and rather than put themselves in a position where that can happen again there are more start-ups. Some of these will succeed and others will fail but certainly for the next year or two this bodes well for the shared office business.
Do you think this alternative office space is doing as well in smaller suburbs or is it a metropolitan phenomenon?
Shared offices, in my opinion, is a metropolitan phenomenon. In suburbs, the buildings are much smaller and often have small spaces that are available. Even though they do not provide the amenities, the availability of very small units deters shared office companies from opening.
What do you see as the biggest challenges for the serviced office sector?
The biggest challenge in the service office sector is quality. Companies like OfficeLinks, which is new to the industry, are providing much higher quality and types of service. Several of the shared office spaces that exist are quite old and if they are not updated both cosmetically, but more importantly physically, they will not succeed.
Do you see any differentiation between the major serviced office companies out there right now? If so, what differentiates one from another?
To me, the major differentiation is the quality of service as well as the availability of the most up-to-date technology. These types services, which are provided through OfficeLinks, will lease faster and command higher rates.
Do you expect to see commercial brokerages acquiring serviced office companies in a move to capitalize on this trend?
I do not see commercial brokerage companies acquiring shared office companies because in virtually every instance they are very management-intensive and the big real estate companies have enough issues without taking on management-intensive businesses they do not know.
What about commercial office developers? Do you think they will incorporate more square footage for serviced office space?
In my opinion, commercial office developers may provide what we call spec suites. In other words, the building will take existing space and renovate it. They will provide full services and amenities to tenants on a short-term basis. The fact that the space is built facilitates this type of endeavor.
Do you expect the serviced office industry to emerge from the recession much stronger due to its business model? Or will it fade back into the background once the markets recover and folks are more confident in the traditional lease options?
The shared office industry will emerge from the recession changed. While I think that in the short-term all of them will benefit, in the long-term those that are kept ahead of the curve both cosmetically and technology-wise will continue to succeed in leasing their space for higher rents and faster than those companies that have not kept up.
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Melanie Jones April 24th, 2009 at 12:04 pm
Interesting perspective. This guy has been in the industry for 45 years, yet I don’t completely agree with him and I’m just a mere observer. I think he’s right in the sense that serviced offices that are cosmetically sound and have the high-tech amenities will fair better than those that don’t, but I think the entire executive office suites industry is going to come to a new level of acceptance and awareness during this recession that it missed out on in the last one.
Rob Zeus April 24th, 2009 at 12:16 pm
Does this guy have some connection to Office Links? He mentions them twice, and there are many others that fit the bill here.
I suppose it could be possible that executive office suites are just passing through another trend phase because of the economy. But something seems different this time. Wasn’t it Regus that struggled during the last downturn, and this time the company, along with many other serviced office providers, are doing really well. Has something changed?
Maggie Correta April 24th, 2009 at 12:33 pm
I’m not clear that he’s talking about the same thing as we are. He keeps saying shared offices. I guess that’s just another term for executive office suites in one way, but it seems a less common moniker. You aren’t really sharing the office space unless it’s a co-working facility. You are sharing the conference room, bathrooms and kitchen.
Mike Sullivan April 25th, 2009 at 7:07 am
Rob – I don’t know the answer about the relationship with Office Links, but it sure sounds like there is something there, huh?
Regarding Regus, I think they’ve significantly improved the model since 2003. Their cash position is solid; they’ve reduced the risk associated with many of their new properties; they have lots of new sources of revenue; and they work with more large corporations who tend to pay higher rents. I’m sure there are other things. This puts Regus at a real advantage over the smallest providers (which makes up 85-90% of the industry) from the sustainability standpoint. This doesn’t mean small companies can’t make it. Most can… but a lot are struggling, while Regus moves forward and continues to generate cash. My hope is that the smaller companies begin to push the envelope on marketing themselves, adding new services and upgrading their facilities. This is how they’ll compete in the long run. I think Peter Drucker once said that business has only 2 functions – marketing and innovation. A field of dreams kind of business won’t cut it in an industry with the huge risk associated with lease/sublease model. These companies need to innovate and market themselves in order to not only survive the downturns… if they do a good job, they may even grow. Imagine that!
Jennifer LeClaire April 25th, 2009 at 7:54 am
I agree with Mike. What’s interesting is that Regus came through its struggles way stronger than it was before. A lot of growing serviced office providers can learn from Regus’ mistakes. The company is on a winning streak now because, in part, it knows what not to do. The executive office suites industry is a lot like self-storage in that there are a few dominant players and a lot of one-offs that can do very well in their local markets.
Rob Zeus April 27th, 2009 at 7:40 am
Thanks, Mike and Jennifer for taking the time to spell it out. Regus does seem like the superstar in the serviced office space. And it seems that’s partly because they learned their lessons well. Like Jennifer said, other companies and the entire executive office suites industry can benefit from what Regus went through to some extent. Thanks again.