The Office Amenities Arms Race

December 14th, 2019

Golf simulators. Juice bars. Co-working spaces. Onsite fitness centers. Plug-and-play stations.
Recognizing a tenant demand for more inviting office space, landlords and developers are touting their investment of amenities into building renovations or new office space, according to NAIOP, a commercial real estate development association. From small, class-B buildings to high-rise towers, office spaces here in Northeast Ohio are among those revealing a fresh, new look.

“We’re seeing more amenities that are suited toward live-work-play,” says Terry Coyne, a commercial real estate broker and vice chairman of Newmark Knight Frank.

Increasing office vacancy and tenant competition are contributing to this trend. Meanwhile, talent recruitment and attraction remain a consistent priority among companies and organizations, which are also challenged with a tight labor market. Tenants that can offer a unique mix of amenities boost their chances of luring top talent, he says.

“Sometimes, the available office space is the last part of a potential tenant building tour,” says Coyne, who has been involved in the sale or leasing of nearly $2 billion in commercial real estate.

He shares his thoughts on what is driving the rise of amenities at the office.

In which local buildings, spaces or markets are we seeing this trend materialize, and why?

Several office buildings that we represent have amenities that stand out from the rest.

For example, AECOM Center, located in downtown Cleveland at 1300 East 9th St., is in the final stages of an $11 million renovation by owner Rugby Realty. Some of these improvements are highly unique to the market, and include a 6,000-square-foot fitness and recreation center with a half basketball court, golf simulator, pickle ball, new locker rooms and state-of-the-art fitness equipment; the modernization of elevators with destination-dispatch technology; a fully updated conference center; a renovated lobby and new tenant lounge; and updated lighting, paint and finishes in common areas. The building will soon feature new restaurant and juice bar facilities. It currently is connected to a Starbucks, the Westin Hotel and Urban Farmer restaurant, and features a Chase Bank branch.

Other downtown Cleveland buildings with strong amenities include: One Cleveland Center, 1375 E. 9th St., which has a well-regarded conference center in addition to an attached bank branch and café; and 250 West Huron, which is attached to Tower City Center, a mixed-use complex that includes the Ritz-Carlton, Renaissance Cleveland Hotel, a movie theater, a Key Bank branch, a post office branch and several retail and restaurant options.A significant suburban office building with excellent amenities is 6200 Oak Tree Boulevard in Independence, which features food service, a day care facility, fitness center, 99-seat auditorium, a training/meeting room, a small conference room and a 797-space parking lot.

What amenities seem to be the most desirable, and why?

We have found through both research and in our daily interactions with tenants that companies are increasingly looking for buildings that have some of the following value-add amenities: a fitness center; a restaurant/café/coffee shop; a connected conference center (with both large and small room options); public lounges or areas with Wi-Fi and charging stations; convenience store options; modern and quick elevators; and attached parking. In addition, there has been an increase across the country, and in Cleveland, for building owners to support, and sometimes help supplement, related fees for unique food programming options such as food trucks and food order/delivery services. Some high-end conveniences such as concierge service, valet parking and dry cleaning services are also sought after.

Amenities within a given tenant’s office space have also become more important, such as the availability of healthy drinks and snacks, in-office lounge or recreation/game areas, internet connectivity and sit-stand workstations.

What should developers or landlords keep in mind as they configure amenities into a new or existing building?

Workers nowadays want to be connected at all times. Not having to walk outside to get a cup of coffee or a meal goes a long way in extending the convenience factor to tenants. When workers leave their office to take a break or to get away from their desks, feeling comfortable in a public lounge where they can charge their phone, check personal email, make a call, see television headlines and rest comfortably has a considerable effect toward contributing to work day happiness. In fact, studies have shown that getting up from your desk periodically can make you more productive and can increase your health benefits. Being able to take advantage of building amenities during those periods makes them all the more worthwhile to employers who seek happy and healthy employees.

What do you expect to see as new office space enters the market?

Companies will not only seek out office space that meets their needs in terms of build-out potential and from a square footage perspective, but they will also be factoring in the building’s location, access to highways and transportation, nearby amenities for its workers and in-building amenities they could “sell” to their current and potential employees. Cool and amenity-driven office space has now become a tool in the recruitment of new talent.

Landlords who own buildings that are beginning to look older and tired will inevitably begin to not only seek amenities they can add within their building, but also freshen up common areas and improve existing services.

What other key development strategies help attract corporate tenants?

The updating of old office or industrial space into “cool” and modern office space has been a trend that both corporate and smaller tenants desire. Cool office space often incorporates high ceilings, exposed brick, wood floors, recreational or lounge areas, high-speed connectivity, a loft feel and different options for employees to collaborate socially and in work-related situations.

In fact, Newmark Knight Frank research indicates that employers nationally are responding to a value shift toward experiences over possessions by offering schedule and location flexibility to employees and incorporating experiences into office amenities. In many instances, this has manifested itself into the providing of experiences in the building or space, like a high-end coffee bar or golf simulator, in lieu of employees “owning” an assigned seat or office.