This is the second installment in a series of articles exploring the office sector beyond negative headlines. The first piece, titled “CRE Experts Dismiss Doom-and-Gloom Office Headlines,” has been published. 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 broad category encompasses everything from high-end Class AAA properties to older but still functional suburban Class C offerings.
Moreover, landlords and ownership groups overseeing these older assets are not simply sitting idly by while worrying about tenants (or lack thereof). According to experts interviewed by Connect CRE, successful owners are proactively enhancing their commercial real estate portfolios to attract tenants and secure leases.
Scott Morse
“We have observed ownership investing millions of dollars in infrastructure and amenities to reposition their assets,” shared Scott Morse of Citadel Partners . “Those who have done so thoughtfully are seeing significant returns on their investments.”
So What Exactly Are These Upgrades?
The most notable improvements include added perks such as fitness facilities, on-site food options, upgraded technology infrastructure, coworking spaces for meetings or collaboration purposes; lobby renovations; hospitality services like concierge assistance; and outdoor spaces for employees’ enjoyment.
Aarica Mims
One prime example is Dallas’s Lincoln Centre – a three-building complex built in 1980 – which underwent extensive upgrades worth millions of dollars in 2022 . The property now boasts an on-site coffee shop, park area with wine market & food hall additions along with updated fitness center & lobby areas. KDC’s Aarica Mims noted that these enhancements led to increased leasing activity at Lincoln Centre .
Another success story involves O’Hare Offices , a five-story office building spanning over 171k square feet located within Chicago’s O’Hare submarket area. In early 2023 , this property received complete refurbishment including its lobby space and the addition of a “mom-and-pop” café. Tony Russo with Lee & Associates shared, “O’Hare Offices has signed four new leases this year alone.” He added that positive word-of-mouth from brokers about the building and its ownership played a significant role in attracting prospective tenants.
David Martin
Terra’s David Martin also emphasized the importance of incorporating health & wellness amenities to attract tenants. According to him, healthy employees are more productive and satisfied at work – leading to better retention rates for companies.
In addition to physical upgrades, landlords can offer administrative perks like flexible lease terms or advanced technology integration within office spaces for improved efficiency and productivity – as suggested by CREXI’s Eli Randel .
Hayim Mizrachi
MDL Group’s Hayim Mizrachi highlighted tenant improvement contributions as another powerful incentive: “New product offerings or spec suites for existing properties can be an attractive proposition.”
But Do These Upgrades Actually Work?
The consensus among experts is that amenity upgrades and lobby refurbishments do improve a building’s appeal to potential tenants. Furthermore, investing time & capital into older assets improves their overall image in the market. As Russo explained,”It shows they are not only surviving but have resources available for improving their buildings.” This gives them an edge when competing against other properties.
Most experts agree that owners who invest in upgrading vintage office buildings see tangible benefits through increased leasing activity. For instance, O’Hare Offices received more interest after its renovations were completed; similarly Lincoln Centre saw multiple new leases being signed following its enhancements.
Eli Randel
Experts also acknowledge that offices aren’t becoming obsolete; instead landlords must adapt their strategies towards hybrid models which incorporate remote work options alongside traditional office space needs.”While we may continue seeing hybrid work models incorporated into employees’ schedules,” said Randel , “we don’t foresee offices going away anytime soon.”
This article originally appeared on Connect CRE .
