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Corporations want more than just office space.

Despite ambitious predictions there is still a challenge ahead before equilibrium is achieved within the commercial real estate market: Vacant space is far in excess of demand and a shrinking tenant base prompted by corporate downsizing has translated into little or no effective absorption and depressed rental rates.

In the midst of this gloom; there is a growing tread towards shared, flexible office space. Today, the priority for corporate real estate managers is to find cost-effective pragmatic alternatives to a conventional office environment. As a result, small "flexible" or shared offices are providing utilitarian solutions and enjoying popularity.

Executive office centers have become corporate America's preferred satellite office expansion and relocation solution. The primary focus is on operational efficiency and revenue enhancing efforts. From telecommuting to remote satellite offices, corporations are determined to achieve greater cost efficiencies while employing individual productivity and customer service.

Corporate executives are steering away from investment in unproductive resources, long-term contingent liabilities and administrative overhead. Decentralization and conservative long-term planning are the rule.

Underlying the success of the executive office center concept is a growing consensus that an office need not be a cost center, with burdensome contingent liabilities and a plethora of daily time-consuming administrative issues. Rather, it can and should be an efficient environment in which to achieve maximum productivity.

"Major successful corporations see executive office centers as a desirable alternative to capital-intensive conventional office space for satellite or 'field' offices," said lane Booras, executive director of the Executive Suite Network, the industry trade association. "In fact, the majority of tenants in the more than 4,000 executive office centers throughout North America are field offices of major corporations."

Executive office centers are providing progressive solutions for tenants (both corporations and entrepreneurs) and for developers. Nearly $2 billion has been invested by developers in executive office centers over the past 10 years, producing .more than sixty million square feet of "shared" office space. For developers, the ability to provide flexible expansion opportunities and extensive executive amenities is a real competitive advantage.

By way of example, in Chicago, Heitman Properties has a shared office operator in one of their Class-A properties. Jeffrey A. Annenberg, senior vice president is optimistic about the relationship: "We were looking to bring in a high-quality operator who could upgrade the existing executive office center facility at One O'Hare Centre. We were attracted by their strong operating performance at other locations and their national sales capabilities."

However operating executive office center facilities present their own challenges. Industry specific, "micro-management" techniques and the ability to successfully exploit the multitude of profit centers is vital.
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Title Annotation:Mid-Year Review & Forecast, Section V; trend is toward decentralization and conservative long-term planning, with efficient office environments achieving maximum productivity
Author:Tannenbaum, Lawrence E.
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
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