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.
Activating Office Building Common Spaces for Competitive Advantage
By Richard B. Peiser, Ph.D. and Raymond G. Torto, Ph.D.
Click here to read the full article.