Of all the sectors hit by the COVID-19 pandemic, none is suffering more today than office. Companies are still struggling to bring their workers back to the office. Building owners are dealing with sky-high vacancies. And no one knows yet just how much office space companies will need as the work-from-home movement continues.
But these challenges didn’t stop City Center Realty Partners from closing 2022 by signing four new tenants at The E, a 107,000-square-foot office tower in the Twin Cities suburb of Edina, Minnesota.
The new leases brought The E to 75% leased. That’s quite an accomplishment: The office tower, jointly owned by City Center Realty Partners and Contrarian Capital Management, started 2022 completely vacant.
What’s behind the success at this building? A $7.5 million renovation, completed at the end of 2021, helped. So have the amenities, everything from a high-end on-site fitness center to the refurbished lobby with fireplace. And the location, in the highly desirable Edina community, has been a bonus, too.
But Eric Anderson, executive vice president with City Center Realty Partners, said that the bulk of this leasing success can be traced back to planning: The owners of this building put in the work to make the space as attractive as possible to tenants and their employees.
“We were pretty methodical in our strategy for The E,” Anderson said. “We set out to buy an asset in a really good location. And we knew we were going to invest in common areas and shared amenities. The amenities we put in create a third workplace. I hate that term, ‘third workplace.’ But we really did focus on creating areas where our tenants can come down and utilize seating that is not in their office. We created these comfortable other spaces for them to work.”
A growing roster
The E’s new tenants are Addison Group; Therapy Suites; Tressler Law Group; and Edina Chamber, Explore Edina and Innovation Lab. Relievant Medsystems and Mitsubishi HC Capital America were the first tenants to move into the building, having completed their tenant improvements last fall.
Other previously announced tenants are Spell Capital and Employer Solutions Group. City Center anticipates that all eight tenants’ offices will be fully built-out and occupied by late spring.
And according to a press release distributed by City Center Realty Partners, the new tenants are not only happy with their space, they are seeing it bring about a steadier stream of employees it back to the office.
“It’s fantastic to see our team motivated and excited to come into the office,” said Jim Teal, president and chief operating officer at Mitsubishi HC Capital America, Vendor Services, in a statement. “We’re very happy with Mitsubishi’s new workspace at The E, and also with the well-designed collaborative spaces and terrific amenities. There’s great energy and vitality here already.”
The E’s amenities include an outdoor gathering space; a tenant lounge with multiple seating areas and fireplace; training and conference rooms; a fitness center; and a patio bar.
The E is also home to murals by local artists, a chef-prepared meal program from The Wandering Kitchen and a fleet of shared e-bikes.
“City Center and Contrarian came up with an excellent formula for The E and it’s attracting companies from throughout the greater Twin Cities,” said Brent Erickson, senior managing director at Newmark, which manages leasing for the property. “The E’s tenants come from the surrounding communities of Edina, Eden Prairie, Bloomington, the West End and downtown Minneapolis. This is bona-fide good news for commercial real estate in the region.”
Anderson pointed to The E’s on-site fitness center as an example of an amenity designed to encourage employees to return to the office. The center boasts spin bikes, a yoga studio, treadmills and rowing machines. The locker rooms include shower areas. The gym even provides towel service for building tenants.
In short, it offers everything that a stand-alone gym would provide, and might be an enticement to those workers still debating how often they want to return to the office.
“We wanted to create a boutique environment,” Anderson said. “We wanted to give tenants access to the amenities that their employees are looking for today, and we wanted to do that at an attractive price point.”
Anderson said that the results speak for themselves. As he says, tenants are looking for a healthful office environment that fosters team morale.
“The office sector is going through an era of change,” Anderson said. “Employers are looking to bring their employees back to the office. They want and need something that provides energy, something that will make their employees excited.”
Anderson said that The E’s location in Edina is a key, too. This suburban area provides a good quality of life. And The E is located near the top shopping destinations and attractions in the Twin Cities, Anderson said.
“We had looked at a number of other facilities, but The E is a perfect fit for our needs,” said Chris Geyen, chief financial officer with Relievant Medsystems, a new tenant at the Edina building. “The combination of a new corporate office with the building’s shared workspaces and amenities really helps to foster a positive work culture for our employees.”
The office sector still faces challenges, in the Twin Cities and across the country. But Anderson says that he is slowly starting to see more activity in this sector. Yes, vacancy rates are still too high. And, yes, companies still haven’t decided if they’ll need smaller footprints in the future.
But Anderson says that buildings like The E prove that buildings that offer the right mix of amenities and location will still attract tenants.
“Remote and hybrid work will be a part of the future,” Anderson said. “But it won’t be as common as what we’ve seen over the era of the pandemic. I think people want to be back in the workplace. Employers want employees back in the workplace. As we start to come into the spring and summer here, I firmly believe that we are going to see greater demand for office space, not less.”
