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Page 16 — Office Properties Quarterly — December 2017
Market Trends
B oth landlords and tenants
in metro Denver’s office
market are feeling the
financial pinch of facilities
improvements. In virtu-
ally every submarket, wish lists
are increasingly crystallizing into
must-have lists. For landlords, that
means adding new amenities and
upgrading existing ones. For ten-
ants, it’s all about recruitment and
retention. The common driver, not
surprisingly, is the millennial work-
force, which continues to reshape
cultural changes affecting ten-
ant spaces and building common
areas.
In its current construct, the
open-plan office just isn’t so open
anymore. This is nothing new.
“Second-generation” open offices
typically include more private or
semiprivate areas within the suite
to offset the core transparency
and cultural intent of the initial
design. The failures of some open-
office environments have been
pretty well-documented. From a
cost perspective, the net effect of
higher density and a smaller real
estate footprint could not always
overcome the many physical and
psychological barriers faced by
business owners and their employ-
ees. Landlords, already schooled in
the capricious nature of millennial
office users, have been quick to
respond by fine-tuning upgrades to
their own lobbies and other com-
mon areas.
Ironically, the current dynamic
between landlords and tenants is
perhaps more complementary in
one regard than
at any time in the
recent past. While
the lease negotia-
tion process can
be adversarial,
landlords and
their millennial
office tenants are
largely moving
toward the same
goal of “hybrid” or
multiuse areas in
which work and
leisure can share
the same space. But those improve-
ments don’t come cheap.
While tenants do have the ben-
efit of rolling retrofit or renova-
tion dollars into an allowance
that landlords pay up front, build-
ing owners must fund their own
improvements out of pocket. Cost
parameters for the design and
construction of both building-side
amenities and tenant suites can
vary wildly based on dozens of cur-
rent and projected market factors.
But there is good news for both
sides. Consumer education coupled
with the availability of wide-rang-
ing and high-quality products have
inspired both landlords and ten-
ants to become much more savvy
shoppers.
Consider this case study of a tech
company in the southeast Denver
submarket. Original estimates for
build-out of the 10,000-square-foot
space came in at about $65 per
sf. The space would include fully
exposed ceilings throughout the
“open” sections of the suite, includ-
ing new spiral heating, ventilating
and air-conditioning ducts with
drywall ceiling accents; upgraded
lighting package with suspended
LEDs and decorative lamps; full-
glass fronts for enclosed offices;
and upgraded finishes, including
carpet tiles and polished concrete.
The final build-out ended up
at $38 per sf without significant
compromise. Exposed ceilings
were minimized to include only
high-visibility portions of the suite.
“Traditional” ceiling tiles were
used in private spaces and confer-
ence rooms. Drywall accents in the
ceiling design were replaced with
premanufactured ceiling panels for
sound absorption. A more modest
lighting package included compa-
rable fixtures at considerably lower
prices.
Use of glass was constrained to
highly visible portions of the suite
like conference and small-group
huddle rooms. A building standard
Tia Jenkins
Architect and
owner, Kieding,
Denver
David Budd Photography
Today’s competitive lobbies often are broken into different types of amenities spaces. This
landlord saved money by not opening the ceiling and by limiting the volume of polished
concrete. More funds were dedicated to collaborative spaces, bike lab, conference room,
flat-screen TV and furniture.