Landlords Look To Curate Tenant Mix So Companies Can Financially Benefit One Another
Office landlords need to provide more than just a roof over workers' heads. They now also need to use their real estate to impact their tenants' bottom lines.
During Bisnow's Atlanta State of the Market event Thursday, Transwestern Senior Managing Director Clark Dean said office landlords need to start viewing their buildings as “business ecosystems that are carefully curated to create specific value” for tenants.
“Now [landlords] can start thinking about what businesses want to be part of that business ecosystem to drive value for them to where the value and business starts to transcend the rent,” Dean said.
Dean was part of a lineup of Atlanta commercial real estate veterans at the State of the Market event discussing the fate of Atlanta's commercial real estate environment in the coming year, especially with the news that the metro area failed in its bid to lure Amazon's HQ2 project.
Transwestern is engaging in this curation at Georgia-Pacific Center, the 1.2M SF office tower in Downtown Atlanta that is home to the corporate headquarters of the pulp and paper giant. The company restructured its headquarters there, freeing up office space for new tenants, Clark said.
Instead of filling the space with just any company needing offices, Dean said they are seeking and recruiting firms involved in supply chain logistics, a critical factor for Georgia-Pacific. Dean said Transwestern is also seeking tech firms involved in blockchain, robotics and automation and even augmented reality.
This mindset means that multi-tenant office towers could become one of the “great untapped potentials” of the U.S. economy, he said. If landlords can populate a building with tenants that can relate to one another, that can ultimately affect those tenants' profit margins.
“[Companies are] looking for a different type of environment, one that actually creates fundamental business value for their businesses beyond just a place to sit and do work,” Dean said.
This strategy is part of a larger war being waged by corporate America for talent, a war in which office space and office buildings have become the battleground and amenities the ammo to lure and retain talent. That is putting a lot of pressure on office landlords to raise the amenity base of their buildings, Bridge Investment Group Managing Director Tina Renee McCall said.
“Today, with the war on talent, your space needs to be a space where your employees want to come into work,” McCall said, adding that tenant lounges, food options, fitness and wellness centers are growing in demand among companies. “It used to be five, 10 years ago, you know, you were finding your space on how big it was and how many desks you can fit in it."
That is even driving suburban office landlords to think and design spaces more like their urban peers, panelists said. A 2017 Savills Studley report highlighted the growing need of urban-like office amenities in the suburban office market.
“The suburban campus is far from dead in Atlanta. Some campuses are experiencing a revival, thanks to savvy owners adding urban attractions — restaurants and cafés — as well as services such as cleaning and catering,” Savills Studley officials said in the report. "As major employers expand their local workforce, they are spending substantial amounts of capital in their facilities, acknowledging that amenities that serve their employees are critical in such a competitive labor market."
Tenants who viewed their space as more “meat and potatoes” in the past are now becoming more creative with their office environments and “changing the way they work, all in an effort to attract and retain [employees]," PMRG Eastern Division President Bill Weghorst said.
“If you can take a picture of the lobby in your building, and it's the same today as it was 15 years ago, then you got problems,” Weghorst said.
Dean said this war for talent is because companies are now placing greater emphasis on innovation, and using that as a lever to expand revenues. As long as that is the case, companies will continue to place a greater emphasis on brain power.
“The war for talent is really not going away,” Dean said. “As long as [companies] focus on that ... the winners are going to be the ones … who have the most innovative people.”