Office Owners Lean Into Daycares And Outdoor Spaces To Lure Back Remote Workers
Boston’s office players are chasing amenities they hope will make their tenants reconsider working from home.
Employers are evaluating their footprints amid the hybrid work discussion, and office owners remain mired in a sluggish office market. In an attempt to make their spaces more attractive, developers are investing in sustainability measures, activating outdoor space and eying practical amenities like daycares.
“There has to be an enhanced experience to what I'm experiencing right now at my house,” said Dave Madson, CBT principal and director of workplace. “It has to be a better experience. Better technology, better tools, better access to human capital and mentorship.”
Fortis Property Group CEO Jonathan Landau is betting on a Boston office rebound with a full-building makeover of the iconic State Street Financial Center at One Lincoln Street in the Financial District. The building’s eponymous tenant will vacate its 20-year-old home in 2023 for a new downtown Boston skyscraper.
Fortis is working toward a recapitalization of the building and a major renovation plan to add amenities including shared sports courts and a food court, Landau said.
“You’ve got to put yourself in a position to be an asset that people will migrate to,” Landau told Bisnow. “There will be a question to pick us versus someone else. I believe with the amenities, we’ll be a no-brainer.”
Vacancies in Boston sat at just more than 15% in Q2 and absorption remains negative despite significant office gains, according to Newmark. More than 2.2M SF of sublease space remains in Boston, according to Avison Young, and millions of SF of new space is set to enter the market between 2022 and 2025.
Public transit ridership is still sluggish and return-to-office rates have dropped each of the past five weeks nationally — average office occupancy last week was at 31.3%, according to building access firm Kastle Systems, which tracks swipes at office buildings in the 10 biggest markets.
Private office owner Synergy Investments recorded a swipe rate in the mid-to-high 20% range among its 4M SF of owned office space and 1.5M SF of managed space, said Al Gogolin, chief operating officer of Synergy's property management arm. Local tech behemoths like Amazon and Google have further delayed their returns to the office, keeping thousands of Massachusetts workers home.
More than 4M SF of Greater Boston’s office space has been removed from the inventory, slated for lab conversions as developers seek to sate the appetite of the red-hot life sciences industry. For office owners sticking with their asset type, major renovations are due to compete with an estimated 4M SF of Class-A office space set to enter Boston between 2022 and 2025, according to Hunneman.
On office owners’ amenity wish lists include dry cleaning, wellness rooms, healthcare provider spaces to allow for on-site medical appointments and daycares. Fit-outs for the childcare facilities are not cheap, but they are well below the 50% premium developers pay to convert office square footage into lab space, according to construction and design experts.
Medical equipment and camera manufacturer Olympus features a daycare at its new 150K SF office at 800 West Park Drive in Westborough, approximately 30 miles west of Boston. The facility did require an expensive build-out including tiny toilets and other features legally required of a childcare facility, and a contract with a private vendor to operate it, said SMMA principal Marie Fitzgerald, who helped design Olympus' office.
“If you’re looking for space, or have a good relationship with your landlord, wouldn’t it be great if there were more daycare centers in these buildings?” she said. “That’s a real pain for people.”
Mayoral candidates have brought the childcare issue to light in Boston’s mayoral race ahead of a September primary. City Councilor At-Large and mayoral front-runner Michelle Wu cited on-site childcare at large office buildings as a key to revitalizing the city’s urban core in a June interview with Bisnow.
“There are lots of uses with the space as we recover that we can think about connecting the other parts of our infrastructure that are much needed in families’ lives," Wu said.
Fitzgerald declined to say the exact cost of Olympus’ daycare, only calling it “extraordinarily expensive,” and representatives for building owner Carruth Capital didn’t respond to requests for comment.
In the urban core, the build-out of a daycare costs less than office and other ground-floor retail and restaurant fit-outs, Skanska USA Building’s Executive Vice President and General Manager Bryan Northrop said. His firm built a daycare between its new office towers at 121 Seaport and 101 Seaport, which today is owned by WS Development and operated by Kindercare. The daycare features open areas, small office space for staff, smaller furniture and separate room for activities resulting in a cheaper bill than fitting out office space, he said.
“A lot of buildings in Boston do have retail space planned in the ground floor of their building, and I think there’s a lot more discussion having that space dedicated to daycare,” Northrop said.
In addition to ground-floor utilization, building operators are sprucing up outdoor spaces with internet and power connectivity for outdoor work, biophilic design elements and water features as key perks for prospective tenants.
Quaker Lane Capital, along with private equity group Alcion Ventures, paid $24M for the 63K SF office building at 110 Canal St. in Bulfinch Triangle, and has mulled building some of this activated outdoor space on top of its parking lot as part of a full-building renovation, Quaker Lane founder Carlos Febres-Mazzei said.
He said he is already planning to upgrade the building's systems and do some touching up. Quaker Lane mulled a life sciences conversion at 110 Canal St. but was swayed by the building’s wider column spaces and exposed brick interior's potential to be a dynamic office workspace.
“We firmly believe a thoughtfully imagined, and high-quality renovation of the building will produce better results,” Febres-Mazzei said. “Whether it’s Class-A or Class-B, I think buildings that are differentiated are going to outperform.”
Gensler is focusing on wellness upgrades at the One Post Office Square renovation it is designing for Anchor Line Partners. The approximately $300M renovation project added a rooftop terrace and expanded outdoor amenity space on the 19th floor, and focused on environmental upgrades, targeting a LEED Gold certification.
“Sustainability, not just in energy, but in wellness, is important as a tenant attractor,” Gensler Design Director Victor Pechaty said. “That’s where the One Post Office Square outdoor settings are something that are seen as very popular.”
Outdoor spaces can't be added at many dense, older downtown office inventory, said Gogolin, the COO at Synergy. His firm’s portfolio doesn’t include any daycares yet, but Gogolin said he would be open to converting some of the ground-floor retail space to that use.
“One of the biggest problems we have is people leaving the workforce to stay home,” he said. “If you want people to come back to work, you have to have a solution for their childcare.”