Tuesday, March 30, 2010

T-Rex Towers: Do Offices Face Extinction? (Part One)

I’ve been off the blogosphere for a while, working on an article--on the future of single-family housing after the credit and banking debacle subsides--to appear in, of all things, print. It’s now also posted on www.ssrn.com/, the Web site of the Social Science Research Network. (If you’re on that site, hit the “search” magnifying glass icon and input 1574507 as the abstract number, or you can find it by inputting my name under “author.” There’s no charge for the download of the whole article.) Okay, enough self-promotion; trust me, blogging’s a bunch more fun. No footnotes required here – and you can use contractions, quotes marks, dashes and words like “bunch” on this site as much as you want.

“So, what’s next”? I mumble, casting about for blog-worthy material. Well, I’ve been thinking about workplace fragmentation a bit lately, meaning how the traditional environment--of standing around the water cooler and getting caught up on news and rumors, of having conferences of a dozen co-workers in a big room--slowly but inexorably is eroding, as social and technological phenomena like telecommuting and teleworking, virtual life commerce and pay/process on-line, and computing “in the cloud” gather momentum. At least, that’s what I’m seeing in my own profession. If that’s a correct impression, and workplace fragmentation (and stronger worker physical isolation) becomes normal instead of ‘edgy,’ then what will become of office development in the next 50 years? If offices - as workplaces - become absorbed into other development modes, or disappear altogether, how will that affect new development? If offices gradually disappear from the built environment of commerce, how will existing office projects be ‘repurposed?’

First, let me introduce what I mean by the term “office.” A too-brief historical perspective is that offices first appeared in the United States around 1880, concurrently with two innovations in construction, the fireproofed steel frame and the elevator. According to Eugene Kohn and Paul Katz, widely-renowned architects, early American office buildings reflected three fundamental concerns coexisting in tension: the needs of the individual employee, the functioning of the organization and the identity between the company and its building.

Moving into the post-World War era, offices are places where one or more persons engage in commercial activities; but then, a drug dealer’s favorite street corner is a commercial site, so I have to add to my definition of office the concept of enclosure. In fact, an office usually is a deliberately structured environment, with “structure” exhibited in customary physical features like work-spaces, customer/client seating, congregational areas such as conference rooms, employee lounges or water coolers, and places where records are stored, manipulated and processed. A second structural condition is the partitioning of these different functions, generally to recognize (or accommodate) the needs for privacy, quiet, assembly or status of the occupant(s). That’s a brief summary of the physical geography.

As to human geography, an office is where certain intensities of gathering are contemplated. Were this otherwise, persons would never have assembled in common workspaces, remaining scattered instead. At the interpersonal level, offices entail collaboration and interactivity, pooled effort directed toward common pursuit of goals, whether mergers of functions, evaluation of performances, or lateral transfer of information. Gathering at various worker-controlled locations or ad hoc, neutral locations seemed too inefficient not to create gathering spaces for repeated, periodic interactions to perform collaborative and interdependent activities. Hence the office building came into vogue.

A broad spectrum characterizes office environments. A Fortune 500 CEO’s office, a “bookie’s” office and a football coach’s office each are distinguishable in myriad traits from the office of the Democratic National Committee. The common features, those of greatest repetition, are described above. Further, in the private sector, seldom does the occupant have use or control of an office environment without spending money for the exclusive privilege of controlling the physical space.

Two recent trends in office development are the condominium, where the occupant is typically the business owner, and the “greening” of such properties, enhancing the sustainability of the built environment. There is no inherent flaw in either such innovation, but the energy invested in promoting these ideas seems misdirected. Future posts will present the case that fragmentation in the traditional work environment and increasing worker independence caused by technological advances will threaten with extinction office development as presently conceived. By “presently conceived,” I include such conventions as siting buildings along main streets or in office parks, or structural massing in concentration. I also will argue that thinking about the need for square footage for storage and processing functions is rapidly becoming obsolete in today’s movement toward “paperless office” environments. I will also suggest that new designs for the built environment, such as live-work projects, will make conventional office development out of touch, at least viewed from the vantage point of small business management. When these realities are supplemented by rising citizen concerns for issues of diminishing renewable resources and carbon footprint excesses, offices will be challenged to maintain market share of forthcoming commercial development momentum. They stand to lose advocates among land planners, equity and debt markets, and customers – the tenant universe. So stay tuned, readers.


Monday, March 22, 2010

Can a Receiver Do the (Dirt) Deed?

There’s an urban legend (or unconfirmed rumor) circulating in Maricopa County that appointed receivers may be selling commercial properties in the near future that they have been appointed to oversee. Receivers are officers of the court, and report to (via accountings) the judges supervising cases where title to the property is in contention (such as those where a mortgagee seeks foreclosure). But receivers conveying property? Hold the phone--and watch the ball, if you’re a prospective auction bidder or arm’s length buyer.

To begin with, there are only a few enumerated categories of persons, besides the record title owner, who can convey title. My mental checklist includes these “eligible persons”:

Personal Representatives of the estate of a decedent, conveying out of a probate proceeding;

Trustees conveying a deed out of a foreclosure sale, permitted under a recorded deed of trust and in compliance with Title 33 of the Arizona Revised Statutes;

Sheriffs under the authority of A.R.S. §33-455, conveying pursuant to a writ of execution; and

Judges via a judgment’s recordation, under the authority of A.R.S. §33-456, where the judgment (directing a conveyance of property) effectively “shall pass title to such property” without any action by the record title owner; this, I believe, arises more in connection with condemnation than any other circumstance.

In Norwest Bank Arizona v. Superior Court In and For County of Maricopa, 963 P.2d 319, 192 Ariz. 240 (1998), our Court of Appeals made these observations about the authority of a receiver:

“A.R.S. §33-702(B) authorizes enforcement of an assignment of rents through the appointment of a receiver, it does not purport to affect title. ‘In the case of a receivership on a mortgage foreclosure, the receivership adds nothing to the title or interest of the mortgagee.’ 65 Am. Jur. 2d Receivers §160 (1972). The United States Supreme Court in a railroad case long ago discussed the effect of a court-appointed receiver's taking possession of a railroad: The possession taken by the receiver is only that of the court, whose officer he is, and adds nothing to the previously existing title of the mortgagees. He holds, pending the litigation, for the benefit of whomsoever in the end it shall be found to concern, and in the mean time the court proceeds to determine the rights of the parties upon the same principles it would if no change of possession had taken place. Fosdick v. Schall, 99 U.S. 235, 251 (1878). We reject the notion that the appointment of a receiver affected title . . . .”

The message above is a bit stiffly communicated, perhaps, but it seems to indicate that a Receiver in Arizona is a management-level employee of the court, without authority, in the absence of a signed judgment ordering the conveyance of the realty, to accomplish a sale. While it makes sense to “entertain offers,” and possibly even to enter into a letter of intent to sell a parcel subject to receivership, the idea of making a binding commitment to convey real property or executing and delivering a deed to a third party without a judgment ordering the sale to take place seems completely out of bounds, and subject to attack in a declaratory judgment action. There is a statute giving a receiver a limited power to sell land, found in Title 44 of the Arizona Revised Statutes:

44-1529. Powers of receiver

When a receiver is appointed by the court pursuant to this article, he shall have the power to sue for, collect, receive, or take into his possession all the goods, and chattels, rights and credits, monies and effects, lands and tenements, books, records, documents, papers, choses in action, bills, notes and property of every description, . . . and to sell, convey, and assign the same and hold and dispose of the proceeds thereof under the direction of the court.

This statute is from the section pertaining to businesses selling merchandise in such manner as to be guilty of consumer fraud, and occurs in connection with unwinding the “outlaw business.” Even here, the receiver has to act under the direction of a court. Folks who want to give receivers in commercial property takeovers the authority to sell had best review the statutes and the receivers had better review the orders issued by their appointing judges with great circumspection.