Spire Realty Group, LP

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We mourn the loss of Pete Winstead, former Chair of the Austin Chamber of Commerce Board of Directors. Austin is a better place because of Pete’s tireless service and leadership on many key regional issues including transportation, air service, public safety, and economic development. The Austin Chamber was honored to recognize Pete as the 2004 Austinite of the Year. Additionally, Austin Gives named Pete and Tomi Winstead as the recipients of the 2023 Philanthropic Leadership Award for their countless contributions to many civic and community organizations. We extend our deepest condolences to Tomi and the family. https://hubs.ly/Q02KJ7ty0

The US Needs More Office Space! (2 of 2) The US population has grown at about 1%, on average, since 1950.?That number, however, has recently trended downward - the growth rate in 2022 was 0.38%; its since moved up and is currently around 0.50%.?Notwithstanding, the US population in 2050 is expected to be roughly 375,000,000; that’s roughly a 0.36% annual growth rate from today. (By the way, we should all hope this increases fairly dramatically, if not it will lead to major issues for the US and global economies but that’s another discussion for another day).?If the US population growth rate averages this historically low 0.36% for the next 26 years - that would mean we’d add, on average, about 1,286,350 people a year.?Using the same assumptions as above, 1,286,350 people need 18.8M SF of office space.?So, the market was at equilibrium in 2022 and we need to add almost 19M SF of office space each year hereafter to just maintain equilibrium.?The office market isn’t in trouble – it needs to continue to grow!?The % of people who WFH full time would need to double, immediately, for the US market to not need additional office space. ? Additionally, like all markets, the office market is fluid - some office buildings will underperform or become functionally obsolete and will need to be replaced with new inventory. The reality is new buildings will be built and old ones repurposed or demolished.?This is in addition to the 19M SF we need each year of additional inventory just to maintain equilibrium.?This is needed and should be welcomed – supply must keep up with demand both mathematically and functionally.?New offices demand higher rents, further improving the market.?Not to mention the positive impact new development has on the larger economy.? ? Additionally, it should be noted that “white collar” (otherwise known as “office”) job growth is increasing in the US at a rate greater than population growth.?I make no assumption for this in my math, but if it continues the office market will only become tighter and create more demand. ? I think its prudent to consider the effect of WFH on the office sector but, like anything else, we need to look at the data and be thoughtful.?WFH is impactful to demand, but so are population counts and trends.? ? Obviously, this is a very shallow analysis and somewhat tongue-in-cheek.?There are numerous assumptions and variables that can and will change and be proven wrong.?The point is, we shouldn’t arrive at conclusions without considering all information.??There is no disagreement that the office sector has been battered and values are currently dislocated.?But is that because there are cracks in the foundation of the industry or because we’re allowing ourselves to accept incomplete information??The reality is not as bad as some would lead you to believe…

The US Needs More Office Space! (1 of 2) In 2022 there were roughly 330,000,000 people in the US.?Roughly 60% of those people, or 200,000,000, were employed full time.?Roughly 25% of those employed were “office users”. It is estimated that roughly 14% of all jobs (let’s, for the sake of conservatism, assume 100% of those are “office jobs”) can be done remotely 100% of the time.?That would mean there were actually about 42,500,000 Americans working in offices in 2022.? ? On average, each person in an office conservatively accounts for 115 SF including circulation (this is across all “office” space - in class A buildings this number is much higher).?That would mean in 2022 office we “needed” 4.8B SF of office space just to meet demand!?But obviously, the market is not 100% efficient; let’s say a healthy market at equilibrium is 87.5% occupied - so a healthy market should have included 5.5B SF.?Guess what… in 2022, the US office market had 5.5B SF (markets are surprisingly efficient!) meaning in 2022, US office market fundamentals (this is not a discussion about liquidity) were at equilibrium.? ? But, Jon, WFH is growing; your 14% assumption will increase over time and as a result the office sector is doomed!?OK, maybe; however, that’s only part of the picture...