Page 14
— Office Properties Quarterly — June 2016
A
new breed of office tenant
has emerged. This tenant
views office space through
a different lens. The lens is
anticorporate, antistructure
and, in a way, antilandlord. It’s been
a love-hate relationship that at
times has been rocky, to put it best.
This new kid on the block is the
technology industry, but the indus-
try is starting to grow up, mature
and play a little nicer with others.
As with any new kid on the block,
people aren’t always the most
welcoming. Landlords started off
despising tech companies and tech
companies despising landlords.
They were everything landlords
were not looking for in a tenant.
“There is plenty of uncertainty
with startups, which can make it
difficult for both sides to feel com-
fortable,” said Dan DeGolier, founder
of Ascent CFO, a local fractional
CFO firm.
Many of the disagreements
stemmed from traditional lease
requirements. For example, finan-
cials. How can a tech company pro-
vide a landlord with two to three
years of strong financials when
they were two guys with an idea 12
months ago?
And lease terms – a five-year
lease? People in the industry joke
that tech years are the equivalent to
dog years; a full lifecycle of a start-
up can happen by the time normal
businesses hit puberty.
Full-floor or entire building leas-
es?! Have you seen the Guinness
Book of Records challenge of how
many people can
you fit in a Volk-
swagen Beetle?
The record was
set at 17 people
(rules require all
participants to be
above the height
of 5 feet, no cheat-
ing). The tech
industry views
office space as a
VW bug. Instead
of 250-plus square
feet per person, try
more like 90 sf per person. These
companies can fit an entire office
in a room originally designed for a
single law firm partner.
And what about expensive ameni-
ties like building conference rooms
and marble lobbies? Hell no. Rip it
out. They need lounge areas and
bike storage.
“I think I’ve spent more tenant
improvement money tearing out
private offices than adding addi-
tional finishes,” said Jim Franklin,
former SendGrid CEO and board
member to several Colorado-based
tech companies.
This antiview of traditional leas-
ing practices has given landlords
heartburn and the same can be
said for tech tenants. Clients voice
frustration trying to lease when
landlords didn’t understand the
company’s needs.
“From the landlords perspective,
it seems like the company is way
out of their league,” said Matt Tal-
bot, CEO of GoSpotCheck. “For the
company, it seems like the land-
lord doesn’t ‘get it’ and must be
insane for not feeling 100 percent
confident that your little, unproven
startup will be a market leader
doing tens of millions in revenue in
no time.”
Going back to the new kid on the
block analogy, both sides are finally
starting to grow on each other.
They’ve played the game of puffery
and held strong that they didn’t
have any desire to get to know the
other. But overtime, after a few
games of stick baseball and a few
scabs from touch football, they real-
ize the other one isn’t so bad.
“Landlords are indeed still in the
midst of an evolution when it comes
to understanding and satisfying
the needs of tech companies,” said
Austin Kane, vice president at Unico
Properties.
Landlords are beginning to see
the value in what a growing tech
company can do for their occupancy
numbers.
“For us, it has gotten easier and
easier as we have proven out our
model and shown a strong track
record of top-line growth,” said Tal-
bot.
In downtown Denver, 1801 Cali-
fornia is an example of a building
that is courting tech tenants. The
most recent tech tenants, SendGrid,
started in 2009 with three founders
and no office space. Fast-forward 6½
years, they have raised $48 million
in funding and leased enough office
space to accommodate more than
450 employees. With the help of ten-
ants like SendGrid, 1801 will have
leased over 1 million sf of space.
So what is next for the tech tenant
and landlord relationship? How will
landlords adjust to better under-
stand and accommodate this not-
so-new kid that seems to be here for
the long haul?
Some say co-working might help
tenants and landlords bridge the
gap in their relationship. Buildings
such as The Lab and Triangle Build-
ing have used the co-working com-
pany WeWork to take advantage of
the tech industry without directly
having to deal with the growing
pains.
In this model, the building land-
lord gets his long-term lease and
full-floor tenant, while the tech ten-
ants get into the cool, hip building,
can jam an entire company in a law
partner-sized office, take a short-
term lease and have all the kombu-
cha they can drink.
Other services like PivotDesk.com
can help bridge the gap finding flex-
ible, shared office space for these
growing companies.
“Real estate has been a key stra-
tegic issues for tech startups these
last few years because of the scar-
city of talent,” said Franklin. “Having
the right type of office in the right
location has become a ‘pay to play’
factor in hiring and retaining the
right talent.”
It’s now the responsibility of the
landlord to make the changes and
be open minded enough to prepare
for the next SendGrid that comes
knocking on his door.
s
Jason Lewis
CEO, Ecospace,
Denver
Broker Insights
