By Phil Stafford, Principal, Colliers International in Chicago
To attract and retain the best and brightest talent in today’s corporate workplaces, tenants, and therefore building owners, are focusing more on amenities than ever before.
In the past, fitness, conference, lounge and deli amenities were relegated to lower level, window-less or otherwise underutilized and tough to lease vacant space. Today, in an effort to attract and retain tenancy, owners are investing in and allocating increasing square footage for attractive amenities within traditionally leasable space. The on-site property management team is at the forefront of this development in feasibility studies, tenant feedback, and execution of amenity improvements.
Upping the Amenity Ante: Designing Micro-Communities
A standard set of options defined many office buildings from the previous real estate cycle: an exercise room with a few treadmills, parking garage, a small conference room, minimal deli/or vending area, high-speed Internet, and maybe select tenant space balconies. Now, most office space users are being pushed by an array of market forces to take less space while at the same time, provide greater benefits and amenities to their employees. As a result, tenants are demanding more from the buildings they choose.
The technology industry jumpstarted the idea of developing exciting in-office experiences and place-making more than 10 years ago. Since then, it has been adopted by the creative industry and is quickly becoming mainstream in corporate occupancy. In areas that emphasize the live, work, play lifestyle, tenants often collaborate to develop a bustling ecosystem. Private tenant lounges offer inviting areas to decompress while fostering collaboration through meeting areas outside of, but proximate to, the office environment. Complimentary WiFi, casual seating, café settings, gardens, and televisions or gaming are all becoming expected features. These spaces often complement modular scalable building conference facilities, which may be easily booked through an online system or concierge. Add in healthy-eating options, wide variety of foods, coffee or smoothie bars, plus ample seating areas and the main ingredients for a successful modern office are in place. Hospitality design and hotel architectural concepts are being integrated into these spaces within corporate office facilities. Rooftop decks also continue to be a very popular feature that are often located on the same floor as the amenity set.
Usable shared resources are “big-ticket” items. These include fully equipped, professionally staffed fitness centers with Class A locker rooms and showers. Buildings and tenants frequently partner with fitness vendors and health insurance companies to subsidize membership rates. Paired with secure, weather-protected bicycle locking facilities, easy-access showers, and rentable lockers, building users are presented with wellness solutions without having to leave the office.
Weighing the Costs
Owners should be aware that building improvements come with several costs. Renovations are obviously not cheap. Eight-figure budgets for complete lobby and amenity overhauls have occurred in downtown Chicago. In addition, capital expenditure projects may increase value on annual tax assessments. It is also becoming more common to devote the majority of a floor, normally the same level as the management office, to amenities. These amenity plates cut into revenue-generating suites; however, amenity benefits should pay back in the form of increased rents, higher quality tenants, deal velocity, improved tenant retention and higher listing prices both in the leasing and investment sales markets.
The Property Manager is the Quarterback
Property managers have a great opportunity to learn from the market. They should get out and see the revolution of amenity development within their competitive set and beyond in other submarkets or cities. In this upswing of the commercial real estate investment cycle, capital is rushing to acquisition and property improvements to capture tenant demand and create value. Architects, general contractors, fellow managers, developers, owners and leasing agents have a wealth of knowledge and creative ideas to share in design and construction of new amenities. Owners will be looking to the property management staff for creativity, recommendations, design development, budgeting and efficient execution of plans. The manager continues to be the “glue” between owners, tenants, leasing/marketing, vendors and construction management teams surrounding office investments. On-site management teams will also need to account for ongoing operation of new amenities including maintenance, service contracts and operating budget impact.
Capture Demand and Retain Tenants
As the workforce places more value on choice in working environments, investment in a unique amenity set can make the difference between an energetic, productive campus and long-term vacancies. Forward-looking owners cannot afford to neglect these options.
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Phil Stafford leads the Property Management division for Colliers International in Chicago, including responsibility for over 52 million SF in 345 buildings. His department includes a staff of 130 property management, engineering and construction personnel in eighteen local Chicago-area offices. Phil integrates the division with Colliers’ marketing, leasing, advisory and investment sales professionals toward completion of client goals. He is a Principal and a member of the firm’s Executive Committee. Phil sits on BOMA Chicago’s Board of Directors and participates in the Labor Committee, Energy and Sustainability Committee and TOBY Award judging.
