Brooklyn Office Market Could Benefit From Pandemic Shifts In Demand
After a year that changed the nature of work forever, office landlords in Brooklyn are adjusting to post-pandemic reality with a focus on flexibility.
Tenants are currently looking for shorter lease terms, coworking space in the building and something of an experience when they come into work, according to speakers on an office panel during Bisnow’s Brooklyn’s Rally To Reopen event on Thursday.
“It feels like we live now in the year 2035 … working from home used to be 5%, now it’s 30%,” said Matthias Hollwich, founder of architecture firm HWKN. “The future is, we have to offer experiences to people to work for our companies … that's changing everything in the way we think about these buildings.”
Since the coronavirus pandemic hit, design has shifted away from focusing primarily on efficiency to focusing on quality, amenity and location, he said. And in addition to space, tenants want events, concerts and ways to connect the public with their workplaces.
Because of its brand of authenticity as a borough, he added, Brooklyn is set to gain from the altered office landscape ushered in by the pandemic.
“It’s going to become a trend ... for companies to have their headquarters and their office locations here,” Hollwich said.
As more people look to work close to home, Brooklyn’s huge population will serve its office market well, too, several panelists said.
“The way that we work is going to change. And offices will not be utilized in exactly the same way they were before,” Hudson Cos. principal Joseph Kohl-Riggs said. “Nobody really knows exactly what that's going to look like but I think that Brooklyn specifically is poised to benefit … even if those markets in the general sense — nationwide or in New York City — suffer, Brooklyn is going to walk them through well.”
Before the pandemic, it was standard to get a long-term lease signed, but now shorter-term leases are common, Riggs said. Right now, to get leases signed in Brooklyn, landlords are focused on meeting tenants where they’re at as they await the future shakeout of the workplace.
“They don't know how big they'll be in a few years, they don’t know what their work will look like,” Riggs said. “They are figuring it out as we are … they want space, they need to work but they don’t want to commit to 10-year terms.”
Whether a short-term lease or a long-term lease with a termination option is better for landlords when negotiating deals is a tough question, Savanna Managing Director Cooper Kramer said.
“I know everyone up here has pride in our buildings. So we think that once tenants are there, they're going to want to stay there,” he said. “Frankly, I'm OK with a termination option, because I think in the majority of those cases, the tenant will not want to terminate if you have built a good product.”
With many office tenants wanting to move into their spaces almost immediately, ready-to-use spaces are popular, Riggs said.
“If they’re in the market right now, they want to move in in a few weeks,” he said. “The fact that we've built out some of these turnkey suites has been a boon for us.”
Many tenants considering shifting the size of their space over their lease term are also asking for additional coworking spaces as an amenity in the building, according to the speakers.
“A lot of these companies need to flex-up and flex-down,” Brookfield Properties Senior Vice President of Development Alireza Esmaeilzadeh said. “So whether you're solving that through a coworking operator or you're solving that through your own product, they want to see that kind of turnkey space be available for them.”
Tenants expect those coworking spaces to be fully serviced and fit the aesthetic of a building's particular office submarket.
“I think that's going to become critically important as we move forward,” he said. “That is going to be another avenue for growth.”
Although the coronavirus's delta variant is stoking concerns about the nation’s economic recovery, speakers on the panel said that they doubt it will affect the real estate market’s recovery.
"I think we're a little more prepared now," International Workplace Group Eastern Region Area Vice President Frank Puglia said.