CREJ - Office Properties Quarterly - January 2015
The word “amenities” is a major buzzword in the office property market today. There are amenities provided by the building, amenities provided by the employers and amenities based on building location. Rather than present the employer-based amenities, often thought of as perks, such as dog-friendly office policies, adjustable and unassigned work stations, and other incentives, instead, let’s focus on the top trends building owners are advertising as major conveniences and benefits. Owners must take into account many considerations about what they should offer in a new building or in a renovated one. The first one is cost. Owners must determine the sweet spot, in which rent levels remain tolerable or competitive while the building provides tenants as much as possible, said Jennifer Bridges, Kieding senior project manager. Another is what type of clients the owner wants to attract. Generational needs play a big part here. Those looking to attract millennials must consider the location thoughtfully, as well as what types of activities those future employees like to do. For example, a Westminster redevelopment trying to entice tech companies to lease space features indoor bike storage, a climbing wall and a game room, among other things, said Bridges. And then there’s the competition factor. By knowing what other office buildings of similar size and age offer, owners can decide to meet or, most likely, try to exceed those features. For example, an out-of-town buyer recently visited the Denver Tech Center looking to invest. After visiting several area properties, he jokingly dubbed himself the “restroom king.” He said he planned to upgrade his property’s bathrooms, which is a property feature that typically doesn’t see many updates. In doing so, he said he’d raise the bar for all buildings in the area, said Bridges. “It’s all about the state of the market,” she said. “In certain submarkets, restrooms have become underwhelming across the board.” There is also an amenities curve. Some buildings are always ahead and some are always a little bit behind, said Bridges. Every client must find the right blend as it furthers its corporate culture. However, most experts agree that there are some must-haves if a building wants to compete in today’s competitive environment. “Amenities should be things that are easily accessible and actually used,” said Bruce Johnson, Cresa Denver principal. The baseline for building-provided amenities includes break rooms, multipurpose meeting areas, on-site fitness centers, cafes or food service, and wellness rooms, said Bridges. Bike storage is another feature that is quickly becoming mandatory for businesses located in the central business district. In today’s market, it’s often not enough to offer a stripped-down version of these features. A building must either go all out, or it’s not worth doing, said Johnson. For example, the workout areas must be really tremendous, with showers and locker rooms. The bike storage must be indoors and fully secure. Some buildings are now touting proximity to B-cycle or light-rail stations and other forms of public transportation as an amenity in and of itself. “You must be providing an Ecopass and a locked, secure area for bikes,” said Phillip Infelise, Cresa Denver national director of project and facility management. “If you don’t have that, you’re really not recruiting.” Another feature that is gaining popularity quickly is outdoor space. Since the 1980s, architects in Colorado have tried to incorporate balconies and other outdoor spaces into building designs, said Bridges. However, these balconies were often built off corner offices, which limited, and often times restricted, who used them. “Now a lot of clients are looking at rooftops as possible ways to offer outdoor space,” Bridges said. Several new buildings are incorporating patios into their design and there are about five or six smaller LoDo buildings that feature useable rooftops, said Johnson. Newmark Grubb Knight Frank is working with Canadian developer First Gulf, out of Toronto, on the 1401 Lawrence St. project. “Our experience in our recent urban developments is that people are really attracted to this concept of indoor-outdoor space as an amenity,” said John MacNeil, First Gulf president. “Our goal was to bring that feature to our Denver project at 1401 Lawrence Street.” The building at 1401 Lawrence St. will have two indoor-outdoor areas. One is already leased and will be on the 22nd floor. A second patio will be on the ninth floor, with the plans still evolving. The ninth-floor patio will offer unobstructed views of most of the city skyline, said Jeff Castleton, the project’s listing agent with NGKF. A fitness facility with showers and lockers also will be on the ninth floor. Patios present a prime opportunity for hosting and socializing, both of which help create the community feel that many companies want. The Starbucks concept of a “third place” is also presenting itself in a variety of ways to create this social environment. These communal places recognize the power of a change of scenery, said Johnson. “It’s not the office and not the home, but a third space; even though it’s within the building, it’s not in the office proper,” said Bridges. Updated lobbies are also beginning to reflect a more relaxed, social vibe. Everyone in the building can use these conversational areas. Some buildings offer Wi-Fi to guests, while others feature fully wired workstations. “One other thing we’re seeing in the nondowntown markets is a lot of office properties with really large lobbies – often with courtyards, water features, planting beds, etc.,” said Bridges. “We’re seeing those things come out, and the space changing into areas for tenants by providing amenities like breakout spaces and loungy spaces where employees can go to get out of the specific office, but still be in the general building.” The increase of mixed-use tenants on the first floor of office buildings is often included for tenant convenience. Coffee shops and cafes are a definite must have; and other mixeduse anchor businesses, such as restaurants, dry cleaners and banks, are gaining popularity. “We had a huge law firm client, and they had a Starbucks in their lobby,” Johnson said. “They said, ‘Wherever we move, that building better have one in the lobby.’ So obviously a coffee shop is important. People love to get that jolt, and love having a convenient place to meet.” The Lawrence building is planning for a restaurant tenant that is ideal for business lunches, with the possibility of having a quicker grab-and-go offering as well. The owner is also considering a potential bank branch as one of the anchors and a coffee shop, said Castleton. In other buildings, it’s not uncommon to see dry cleaners, child care and other retail. “A deli is important, especially in a suburban environment,” said Infelise. A few places are beginning to offer meals to take home, which allows employees to put their meal request in whenever and pick it up on their way home. This convenience factor is one reason why many buildings have started considering their surroundings as potential amenities. In addition to proximity to a light-rail station, nearby restaurants and bars are a plus. This is especially valuable when recruiting from the millennial generation, which tends to seek the urban environment for both work and play. Locations near hotels is another important amenity for tenants who have a lot of visiting guests, as well as easy access to entertainment, including the theater, movies, museums or retail. One amenity that has been standard for a while, but takes on a lot of different names, is a wellness room. In addition to wellness, it’s been referred to as a mothers’ room, a quiet room, a nap room or, in places where mixing religion and work isn’t as taboo, a prayer room, said Bridges. “Typically in Denver, it’s a room with a dimming-light feature and a calming, quiet environment with quiet views or soothing artwork,” she said. “Sometimes there is a subtle sign somewhere in the room that recognizes the direction of Mecca,” for example. Other amenities can come in the form of building upgrades. It is currently a landlord’s market in the Denver area, so buildings are able to charge more for rent without offering as many amenities and upgrades. However, because the market is competitive, that threshold is always changing. Current upgrades include state of-the-art automation. A variety of features are covered under this, from elevator dispatching systems to lighting preferences, which can dim or brighten depending on the amount of sunlight coming in. Many tenants are interested in a building’s sustainability efforts. While some are interested in a LEED-certified building, others want areas for recycling, or to feature reused materials or to take advantage of natural daylight. Some new buildings, like the one on Lawrence Street, are even considering charging stations for electric cars in their parking lots. “Most clients want buildings built toward LEED standards, even if they don’t plan to go through with the whole certification process,” Bridges said. While the newest amenities are always in flux, the office properties market caters to many niches. From there, it’s a constant bettering game from one property to the next.