Sometimes I geek out over office space. Today’s narrative is one of those just for the interested. Here is a link to a survey conducted by the National Association of Industrial and Office Professionals (NAIOP). This 50-page deep dive into the topic asks real estate owners and professionals their thoughts on Co-working vs. Building Collaborative areas and what is needed to stay competitive. This is a very interesting read but lengthy, so as I so often do, below I have provided the condensed takeaways:
- Tenants pay for “free” common area amenities. Owners bake in the expense of these amenities by increasing CAM’s and Load Factors. This change has been a below-the-radar increase of 10-15% increase in rents without tenants really knowing.
- “Communal & Programming Amenities” are the new “Traditional Amenities” (see chart below).
- Given the full employment, tenants now are requiring all these new amenities to attract and maintain talent.
Owners are now starting to create and manage their own co-working operations in their buildings to compete with the WeWorks of the world (See my narrative on this here).
A perfect case study for this can be found at a project my team does the leasing for — Renaissance Square in downtown Phoenix. This 1 million SF project recently completed a $50 million remodel that includes the following:
- 2 renovated lobbies that include expansive common area seating with charging capability at almost every seat.
- 10,000+ SF gym remodel that includes Basketball court, Racquetball court, all new gym equipment, training classes, and a locker room with sauna.
- 10,000+ SF Tenant Lounge with 3 common area conference rooms, free coffee and tea, kitchen, arcade games, ping pong, Foosball and common area WIFI.
- Programmed Amenities – Weekly programs offered by management that include Bingo, Arts and Crafts Classes, Massages etc.
- 40,000 SF of co-working space operated by Spaces.
- 100,000 SF of move-in-ready spec suites.
The competition for employees is fierce. The competition for office tenants is just as fierce. The market is changing. Give me a call if you want to discuss further.
Craig
602.954.3762
ccoppola@leearizona.com
Activating Office Building Common Spaces for Competitive Advantage
By Richard B. Peiser, Ph.D. and Raymond G. Torto, Ph.D.
November 2017
Click here to read the full article.