This is the second installment in a series of articles exploring the office sector, delving beyond sensational headlines. The first piece, “CRE Experts Dispel Doom-and-Gloom Office Predictions,” is now available. Upcoming articles will delve into topics such as debt maturity and industry opportunities.
Tony Russo
A previous Connect CRE article debunked the notion that the office sector is doomed. This label encompasses a wide range of properties, from top-of-the-line Class AAA buildings to older but still functional suburban Class C spaces.
Moreover, owners and landlords are not idly fretting about their tenants’ occupancy levels. According to experts interviewed by Connect CRE , successful ownership groups are actively enhancing their commercial real estate assets in order to attract tenants and secure leases.
Scott Morse
“We have observed owners investing millions of dollars into infrastructure upgrades and amenities for repositioning purposes,” shared Scott Morse with Citadel Partners . “Those who have done so thoughtfully are seeing significant returns on their investments.”
So what exactly does this entail?
The primary focus has been on adding extra features such as fitness facilities, on-site food services, and improving technology infrastructure. Coworking spaces, meeting rooms renovations in lobby areas ,and hospitality-related services like concierge assistance have also proven effective at boosting tenant appeal. Outdoor areas also play a role in these upgrades.
Aarica Mims
One example can be found at Dallas’ Lincoln Centre – three buildings built during 1980s which underwent major renovations worth millions of dollars back in 2022 . The property’s new additions include an onsite coffee shop,park,wine market,and food hall along with updated fitness center facilities.The lobbies were also revamped.”These improvements resultedin increased leasing activity,” noted KDC’s Aarica Mims .
Another case study comes from Chicago’s O’Hare Offices -a five-story complex spanning over 171000 square feet located within O’Hare submarket. The property’s lobby underwent a complete renovation in early 2023, and a small café was added.”O’Hare Offices has already signed four new leases this year alone,” said Tony Russo with Lee & Associates . “Positive word-of-mouth within the brokerage community about the building and its ownership is helping attract potential tenants.”
David Martin
Terra’s David Martin also emphasized that renovations focused on health and wellness can significantly enhance a building’s appeal to prospective tenants. “Healthy employees are more productive, happier overall,and this ultimately supports companies’ talent retention efforts,” he explained.
In addition to these upgrades, there are administrative perks that can entice tenants as well.CREXI’s Eli Randel pointed out how landlords could offer flexible lease terms while incorporating advanced technology into office spaces for improved efficiency.
Meanwhile,Hayim Mizrachi of MDL Group highlighted how tenant improvement contributions could be an effective lure for existing or newly constructed suites.”If it is new product or spec suites being offered by an existing asset,it becomes even more powerful,” he noted.
But do these strategies actually work?
Eli Randel
Undoubtedly,the addition of amenities and lobby refurbishments can make buildings more attractive to potential occupants.However,this effort also enhances the optics surrounding older office assets.”By demonstrating their ability to not only survive but invest in their properties,these owners have gained an advantage when competing for prospective tenants,” elaborated Russo .
Most experts agree that owners who dedicate time towards upgrading vintage offices have been rewarded with increased leasing activity.As mentioned earlier,O’Hare Offices has seen heightened interest from potential occupants following its recent upgrades.Similarly,Lincoln Centre witnessed multiple new leases being signed after implementing similar improvements.
Hayim Mizrachi
Furthermore,the experts acknowledged that offices aren’t failing; instead they’re adaptingto meet changing demands such as hybrid work models which show no signs of disappearing anytime soon.Randel concluded:”While we may continue seeing a hybrid work model incorporated into employees’ office schedules,we don’t foresee the demise of office buildings anytime soon.”
This article was originally published on Connect CRE.
