It’s an extremely competitive office market where the “flight-to-quality” trend continues, as tenants prioritize amenity-rich, top-quality space to enhance the work experience.
The premium buildings touting all the bells and whistles are scoring higher occupancy as tenants look for ways to attract employees back to the office.
“The market has been bifurcated almost to the point that you’re either solving for all these needs and requirements on the amenity side and truly are a Class A building, or you're not,” says Tyler Kethcart, senior vice president of Business Development for JLL Experience Management. “These Class A trophy assets are really the ones seeing positive absorption and demand.”
However, other buildings can compete as savvy building owners and property managers figure out what amenities they should invest in that will most appeal to office users. Adding the most sought-after amenities can increase asset value and be the difference between a fully occupied building and one struggling with vacancies.
By 2025, commercial properties that incorporate diverse amenities will see 12 percent higher demand from tenants than the average, non-amenity buildings, according to JLL research.
How to compete?
“What can building owners do that are sitting on that cusp of, ’Look, five years ago, we were a Class A building; the bar has been raised,’” says Kethcart. “’What can we be doing that gives us the biggest bang for the buck? What should we be focusing on that’s really solving for demands today?’”
The biggest solution that JLL is utilizing is developing large, flexible, multi-use spaces in office buildings that bring together many functions – from multi-use meeting rooms and lounges to social spaces and events spaces – all in one free-flowing area.
As tenants try to entice workers back to the office, they want flexible, multi-use space for all-hands meetings, large group settings and social events, Kethcart explains.
“At one point in the day, these spaces are a casual place for tenants to hang out and get out of their office. At another point in the day or evening, they’re hosting a meeting or event,” Kethcart explains. “Tenants are thinking, if I can get my people interacting with one another again, that's a step toward getting them back into the office on a regular basis.”
Since tenants don’t have these large, flexible spaces within their four walls, that’s where the building owner can provide it.
“It has a flexible function where, I'm a presenter at one moment in this meeting space that’s fully fitted with all the AV capabilities, and I’m addressing a 150-person group of teammates, but then it opens up, and you step outside, and now you're in a new experience, and it's much more socially focused,” he explains. “There’s a lounge atmosphere, where you do catering and have a bartender to create that social element.”
Tenants have indicated that they want these spaces to have a variety of food and beverage offerings.
Marketing space publicly is an option
Of course, a major retrofit is an expensive endeavor for a building owner. It must pencil out to make the investment work. In some instances, building owners and property managers are expanding these flexible, multi-use spaces for public use to maximize their property’s potential. These spaces can generate a valuable revenue stream.
“Let’s look for solutions that, in addition to driving tenant leasing demand, can also create some standalone revenue streams to justify their existence,” notes Kethcart.
Spaces can be marketed publicly for event rentals and conference bookings, filling in additional dates and times when the space is not utilized by tenants.
“Now you're generating additional NOI through that space,” Kethcart notes.
One example is Copaken Brooks’ Corrigan Station in downtown Kansas City, Mo., an office and retail redevelopment. The rooftop was transformed into a vibrant venue with views of the Kansas City skyline. The Corrigan Station Rooftop is rented out for events, providing a growing, annual monthly revenue stream for the building.
Spaces must be activated, managed
What’s integral for the success of these spaces, Kethcart points out, is effectively activating and managing them. Often, a general manager oversees these spaces.
“There has to be someone thoughtfully programming it, filling it with energy and promoting it, and making sure that people know all the various ways it can be used,” he explains. “Otherwise, it's just a space. It's just a room.”
Owners don’t want a fitness center that nobody uses or an empty conference center.
Emily Nicoll, city leader for Transwestern Real Estate Services' Minneapolis office, agrees about the importance of activation of spaces and services.
“There's a lot of buzz around hospitality in the workforce and workplace environment, and I would agree with that, but I think it's not as simple as creating this cool amenity center,” she notes.
The hospitality theme must be infused in everything that the building is doing – starting when you drive up and park to security guards and building engineers knowing your name, Nicoll says.
It’s not just creating a fancy space that people might just walk by, but it’s a completely infiltrated mindset that creates energy for the tenants and their employees, notes Nicoll. “It has to be a positive experience that keeps people coming back,” she says.
It’s a partnership of the building owner, property manager, company leadership and the employees they're trying to attract back to “make every single one of those positive experiences count,” Nicoll continues.
Hot trend
JLL is currently working on at least a dozen flexible, multi-use projects and delivered about a dozen last year including THE MART in downtown Chicago. (The Merchandise Mart, the largest privately held commercial building in the U.S., was rebranded THE MART).
Owned and operated by Vornado Realty Trust and designed in conjunction with Gensler, The MART opened its new suite of tenant amenities in June 2023.
Vornado tapped JLL’s Experience Management Services team to manage its WorkLife Meetings at THE MART, a 21,000-square-foot conference center and workspace featuring meeting rooms, lounge areas, flexible programming space, and a private café.
Features include an event coordination team, a hospitality-focused check-in process, built-in phone booths for private calls, an exclusive catering partner, and in-room AV controls.
THE MART transformation also included a new, second-floor amenity space with a 23,000-square-foot, full-service health club featuring a multi-use sports/golf simulator; a tenant-exclusive speakeasy lounge; and new retail offerings around beauty, health, and well-being.
Other new trends in flexible amenity spaces
One trend is around the fitness and wellness component. Rather than hiring a full-time fitness staff, building owners and property managers are offering office tenants the ability to schedule on-demand services like personal training and massage via an app. Services arrive on-demand, as opposed to a fitness staff collecting a salary when tenants are not using the services.
Additionally, fitness facilities are transitioning from strictly offering fitness equipment to becoming a true wellness space for relaxation, stress reduction or meditation, notes Kethcart.
For example, fitness facilities are including dedicated zones for recovery suites – for both physical and mental wellness. For physical, tools could include compression treatments, massage guns, and foam rollers. For mental wellness, they can include meditation suites and pods that can lead employees through a guided meditation routine.
Tenant expectations for health and wellness are higher than ever, says Kethcart.
Outdoor, green spaces are also important to tenants
JLL research shows that outdoor space is one of the top amenities that office tenants want. However, only 25 percent say they have access to fresh air in their offices. Building owners have recognized that to compete, it's vital to have a designated outdoor or rooftop area for tenants to work and lounge.
Older buildings may need some modifications to offer balcony areas or landscaped gardens, and in urban environments, options may be very limited to create an outdoor space.
Therefore, some building owners are emphasizing biophilic design to incorporate natural elements and experiences into their built environment.
Strategies could include providing natural lighting through windows and skylights, adding indoor plants to improve air quality and create a connection with nature, and installing water features such as waterfalls or fountains to create a peaceful, relaxing environment.
Whatever a building owner’s strategy is for attracting tenants, these multi-tenant spaces should be flexible, wellness-focused, and provide advanced workplace technology to address the continually changing needs of today’s office tenants.
*Photo Credit: Jason O'Rear