We’ve all heard of the rich perks leading tech companies offer their employees – from gourmet food to full-service gyms. Borrowing a page from these companies, office landlords are offering many of those perks to their tenants as added amenities as they look to lease-up their buildings and increase rents. While their interests diverge, today’s office landlords and tenants (not just the Googles of the world) share a simple mission: create a workplace where people want to be and where they thrive. That’s particularly the case today where everyone is looking for ways to retain and attract millennials.
We are seeing office landlords offer such perks nationally as reported in yesterday’s Wall Street Journal – Office Landlords Roll Out New Perks
Years ago, building amenities were sparse, i.e., sundry shop, vending machine, and maybe a small fitness center. Not long ago I saw one suburban building list one of their amenities as “the pond”; but, no swimming or fishing. In today’s competitive environment, however, for office buildings to remain relevant they must step-up their game and offer amenities that will allow businesses to grow by attracting and retaining talented workers.
In Downtown Chicago, existing buildings are under added pressure to compete against the new buildings that are coming online. That’s particularly the case where these buildings are losing major tenants who are moving into these new buildings. Besides renovating lobbies, these buildings are removing “rentable space” from the building and converting it into common area space for use as large conference centers, fitness centers (that rival top gyms) as well as gourmet food courts.
While tenants benefit from amenity rich buildings as a recruiting and retaining tool, they also benefit from being able to be more efficient with their space. For example, a tenant may be able to reduce its internal conference rooms where the building offers extensive conference facilities. Likewise, we are seeing some tenants reduce the size of their kitchen seating areas where the building has tenant lounge areas. Many of these building lounge areas are taking advantage of the great outdoors with roof decks.
Looking ahead, I think we will continue to see buildings ramp-up their amenity offerings particularly in urban areas. Suburban markets are starting to follow suit. For example, I recently toured an office building in Chicago’s western suburbs where the list of amenities included a full-service gym, café, on-site concierge and holiday gift wrapping service. Suburban office buildings have been slow adopters as investors have been more attracted to urban office properties. That, however, is changing as investors are turning to suburban markets for opportunities offering a greater yield. Suburban buildings, without the capital to provide such amenities, will be challenged absent location or some other inherent advantage. Last month, the Wall Street Journal (Suburban Offices Woo Millennials with Food, Fitness and Fun) reported on how suburban office buildings are starting to offer perks and amenities to their tenants.
Blackacre Advisors LLC
DISCLAIMER. Our writings are from a real estate transaction perspective and for informational purposes only. Nothing herein shall be considered legal, accounting, tax, or architectural advice. Please consult with the appropriate professional(s).