Price Or Amenities? 2 Strategies To Filling Office Space
Office tenants are on the hunt for amenity-driven properties that offer their employees plenty of conveniences to drive productivity. Office leasing isn’t a one-size-fits-all operation, however, and some tenants may focus more heavily on the cost of rent.
“With Charles Schwab … they are a value-seeker so they want high density and a low cost of rent. Other tenants that we’ve represented are amenity-driven and are focused on walkable amenities so their employees don’t have too much downtime,” said Dallas-based Rubicon Representation Managing Partner Kyle Jacobs, who will moderate a leasing panel at the upcoming BOLD conference covering office leasing in Austin, Dallas and Houston.
Lifestyle centers that offer a mix of office, retail and restaurants remain in high demand in all three cities, Jacobs said. “That’s been a theme for years now, and they are still highly popular,” he said.
The newer concept of food halls at office developments has also proven to be a big seller because of the variety options in one location that offers fast, efficient and affordable service and allows groups of employees to enjoy different cuisines while still dining as a group.
Landlords can pick a track — price or offerings — and lean into a specific pool of tenants.
Value-Focused: Try The GSA
The General Services Administration could be a potential customer at properties competing on price point. The GSA leases a significant amount of space in Dallas, Houston and Austin, and it is often on the hunt for new options.
“I don’t know how we would rank, but we have a lot of leasehold interests,” GSA Director of Leasing for the Greater Southwest Region Jan Trevino said. “We are a big customer to people who are trying to lease their offices.”
Trevino said the GSA has about 100 leases in the Dallas-Fort Worth metro, 80 in the Houston area and about 30 in Austin. In Dallas County, 10 leases expire in 2019, eight will expire in 2020 and nine will expire in 2021.
The GSA, according to publicly available information on its website, leases about 3.7M SF in Collin, Dallas and Tarrant counties — the three most densely populated counties in DFW. It uses an online platform where anyone with office space can enter the parameters and lease rate. Any leases of over 10K SF are advertised on the site.
“If they happen to meet the need that we have and be the lowest price, we call them up and we say ‘here’s the agency and here’s what we’d be using the space for, can we have the space at the rate you put into the system?’”
Except for the very biggest deals, when it may use a real estate broker, the GSA uses the online platform for most of its lease deals, she said.
As leases expire, the GSA has been encouraging the governmental agencies it represents to downsize their spaces to save the taxpayer money and to become more efficient, which means an incumbent landlord may not necessarily have an advantage to retain a GSA lease as it comes up for renewal, Trevino said.
Crescent Real Estate Managing Director John Zogg said the employee experience remains paramount for landlords as they compete for tenants, which it keeps in mind when it updates existing buildings.
At the Crescent, one of the company’s signature properties in Dallas, Crescent Real Estate spent about $30M three years ago to reimagine the pedestrian experience and more recently has improved the lighting in its parking garages and added music. It also tapped the expertise of hotel designers to make sure office lounges are comfortable and inviting.
The company is in the midst of a top-to-bottom renovation of 2401 Cedar Springs, an Uptown office building built in the 1980s, with completion expected early next year, and is putting the finishing touches on The Luminary, a West End property of 105K SF. Corgan, the architect, will take some of the space and leave about 80K SF of rentable space available.
And of course the company considers these same experiential components in its new buildings, too. Crescent paid a lot of attention to design details at McKinney & Olive, a newer signature Dallas property designed by César Pelli that is now fully leased with the exception of one restaurant space for which it has a letter of intent, Zogg said.
“A lot of people don’t realize but the last time that Dallas used a world-acclaimed designer for an office building was in the 1980s,” he said.
Hear from Zogg, Trevino and Jacobs at Bisnow's Office Leasing & Development conference Nov. 29 in Dallas.