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.
Introduction to BOMA 2017
Since 1915, BOMA has set the standard for one of the most universally adopted methods for measuring buildings. Over the years BOMA has revised their standard to reflect the changing needs of the real estate market; before 2017, the last major update was in 2010.
Every edition of the Standards comes with some design changes and further clarity. This year is no different, with a larger Glossary of Terms, more pictures, a new,
step-by-step format, and a section on Best Practices. There is also an emphasis on the International Property Measurement Standard for Office Buildings (IPMS)
compatibility. (BOMA, 13)
Who We Are
Real Data Management (RDM) is the leading provider of commercial real estate solutions and software. The RDM platform, RealAccess™, integrates your leasing ownership data into one system of record for floor plans, measurements, occupancy, analytics, and marketing materials. Using RDM’s full suite of solutions, customers yield reduced operation costs, increased productivity, enhanced
planning, and expedited marketing. RDM’s customer map includes over 500 million square feet of real estate in hundreds of buildings nation-wide. Headquartered in NYC, RDM has sales offices and measurement partnerships in all the major U.S.
Objective of RDM's Research and Analysis
RDM was curious about how CRE professionals were reacting to the new BOMA 2017 Office Standards. We surveyed a large sample of brokers across the United States, which included both small shops and the top brokerage firms in the country. Besides just determining the awareness and general sentiment towards the new BOMA 2017 Office Standards, we also set out to determine the overall impact these changes will have on building owners. Listening to the brokers’ perspective is one way to gain an understanding of this topic.
Questions we sought to explore 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?
The BOMA 2017 Broker Overview
We gathered data from top brokerages across key markets in the United States. In order to group our collected data, we utilized the four main regions of the United States:
Midwest: Chicago, Dallas, Houston, Minneapolis, St. Louis
Northeast: Boston, Philadelphia, Washington D.C.
South: Atlanta, Charlotte, Miami, Tampa
West: Denver, Los Angeles, Phoenix, San Diego
The region we are calling the South includes the markets of Atlanta, Charlotte, Miami, and Tampa. These cities were chosen for their high density of Class A and B buildings.
Market Awareness of BOMA 2017
The brokerage community we reached out to in The South were first asked about their awareness of the new BOMA 2017 standards – if they heard of the changes and if so, have they started discussion the impact of these changes with building
Our survey results were split close to 50/50, but lean slightly more towards brokers being aware of the new standards at fifty-eight percent. There was a consistent level of awareness across the markets with the exception of Charlotte and Atlanta.
Brokers Polled in the South Region
Market Breakdown: Regional Awareness
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 future?
Overall BOMA 2017 Pipelines
Overall, there are not many brokers seeings deals that are currently using the new standards, but considering this survey was done shortly after the standards released, we were still impressed by the number of BOMA 2017 deals already showing up in their pipelines.
This will likely only grow as time goes on, considering the average trend toward adoption as seen with older versions of BOMA such as 2007 and 2010. BOMA 2017 was released in October 2017, assuming this trend continues, the end of 2018 potentially 80% of pipelines will contain BOMA 2017 deals.
Current BOMA 2017 Deals in the Pipeline
Our survey showed that a number of owners are planning their re-measurements using BOMA 2017. Forty-two percent (42%) of all brokers in The South responses are aware of at least one owner re-measuring Brokers that represent both tenant and landlord 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.
Deals in Pipeline Using BOMA 2017
Will owners continue switching their buildings over to BOMA 2017?
Will Owners Switch Over?
Though the majority (73%) 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 are not going to jump at the new standards and immediately switch over. They will likely test the market that the buildings reside in and convert one or two preliminarily, as we’ve seen many of our customers do.
As is the case with any new innovation, there is always an adoption curve in which some are early adopters, but as time passes either the new product either fails or begins an exponential growth phase1. Since BOMA is a well establish industry giant, the only logical question is not if owners will switch over, but how quickly.
1 "Diffusion of Innovations,” Wikipedia.org <https://en.wikipedia.org/wiki/Diffusion_of_innovations>
Owner’s want to make changes at a slower pace to see how much benefit they get from re-measuring and how much price pushback 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. Therefore, an evaluation period seems reasonable, but in the long run, it is safe to assume there will be a transition to BOMA 2017 for the majority of properties in the South. Our extended reasoning lies in the following section.
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. This data gave us solid insight into the current state of affairs in relation to the new
standards, but it did not take the brokers’ opinions into account, just the facts that they were aware of. In this section, we will discuss the likelihood that the new standards will be accepted (instead of rejected as something that won’t catch on), as well as the most important question: will the market bear a potential
increase in building size?
Based on this data, 71% of all brokers in the South 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.
Overall Acceptance of BOMA 2017
Tenant brokers are aware that BOMA 2017 will mostly favor the landlord rather than the tenant, due to the fact that many buildings will grow. They cannot see the tenants that they currently represent accepting higher square footages, since this immediately equates to higher rents. Tenant brokers, then, have the implicit understanding that their negotiations may become slightly more difficult.
Though this is an understandable concern, the vast majority of brokers that represent both landlords and tenants, as well as the majority of landlord brokers expect to see BOMA 2017 accepted in due time, as all other versions of BOMA have been. This does, however, leave room for such re-measurement techniques as “modified BOMA,” in which the owners want the building to mostly be measured according to the latest standards, with slight changes in order to preserve perceived, marketable square footages.
BOMA 2017 Acceptance Breakdown
Overall Market Insight
The last point of data is perhaps the most important piece of insight: Will the market bear a potential increase in square footage as a result of the new BOMA standards? The answer is a largely favored “YES”. Owners are acutely aware of the potential benefits that BOMA 2017 will bring their buildings, which means that buildings will likely grow across many different markets. Still, landlords are confident that these same markets will not be negatively affected by such a change. This is wonderful news for Landlords, but how will tenants fair? Let’s take a look at the feelings of the brokers that represent them:
Breakdown of Market Insight
As we can see, this graph follows a similar trend to BOMA’s likelihood of acceptance. There is one key difference, though: Landlord Brokers are a bit more split between if the market will bear growth or not. They are in agreement that the standards will be accepted, but they are not so universally sure that increases in square footage will be fully accepted. Tenant Brokers, as stated before, feel that BOMA 2017 will not be accepted, but specifically feel that Southern markets will not bear increases to building square footages. What this implies is that they feel there is a need to balance higher square footages with some additional strategies, such as Modified BOMA as mentioned before, or potentially lower rent per square foot. This also has a further suggestion that the South is at its peak square footages already, if they think that it cannot bear any more increases.
This is in stark contrast to the overwhelming majority of Brokers that represent both landlords and tenants, though. They’re positive that the market will bear respective changes. Do they know something that the others do not? Our estimate is that these brokers have been on both sides of the deal various times. More than likely, these brokers understand that the market will bear building growth, but there may be some other changes to balance this out, such as lower rents per square foot to compensate for the increased square footage. Another potential possibility is increased amenity and utility negotiations in exchange for higher rent due to square footages.
There is a definite explorative shift towards BOMA 2017 as owners become more curious towards the potential building growth. They are slowly seeking mass market adoption across the South. RDM’s prediction is that 80% of all Southern broker pipelines will have at least one deal that revolves around a BOMA 2017 re-measurement by the end of 2018. Tenant brokers, however, are somewhat less optimistic and are hesitant towards the new standards. To appease them, RDM believes that specific tactics such as a “Modified BOMA,” lower rents per square footage to ease the burden of a higher square footage, or even more amenities/utilities rolled into the now-higher rents.
Additionally, we have published our survey results for the Midwest region. To read more please visit our article about the Midwest here.
To explore your growth potential with BOMA 2017 try our Value Calculator.