The Best Way To Design An Office Is Still Not Clear
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When it comes to building the perfect office space for the modern corporate world, landlords and designers are doing their best to guess what companies are looking for, but the answer is there is still no good answer.
"We could charge an hourly rate for the conversations we have on what belongs in this building — not the shape of it or the color of glass, but what belongs in this building as a draw," MdeAS Architects principal Dan Shannon said at Bisnow's Workplace of the Future event last week.
"There’s a sincere discussion going on there; we’re not getting it right, none of us are getting it right yet," he said. "It will work its way out, but there is a sincere discussion, we just haven’t figured it out yet."
Shannon was one of more than a dozen panelists who spoke in front of more than 300 attendees at 345 Hudson St. in Lower Manhattan, discussing the design trends, amenity packages and strategic decisions shaping offices.
In the last few years, the panelists said, every piece of the decision-making puzzle for companies — from rent to location to lease terms — has taken a back seat to employee retention and attraction. The same is true from the biggest companies in the world to businesses that do not even have a product yet.
Such was the case for Jet.com, the e-commerce business Walmart bought in 2016 for $3B. The company was founded in Hoboken, New Jersey, and back when it had 11 employees, Creative Director Christina Antonopoulos had to design a workplace to attract more talent before the company had anything to sell.
"My role was to establish a very impressive brand when there was no product," she said. "The main driver of the space itself was to be a recruiting tool, first and foremost. We had to compete with the likes of Google ... The space had to be really cool, it had to provide a lot of amenities and flexibility, a tech-savviness, a startup culture."
As recently as five years ago, decisions about where a company's office should be began and ended in the C-suite, Rockefeller Group Senior Vice President Bill Edwards said. But as the push to find and keep the best employees grew to a fever pitch, CEOs began asking employees what they wanted.
"The C-suite had taken the approach that they know what’s best for their company and their employees. That’s evolved to the C-suite listening to employees, understanding what their needs are, what their desires are," Edwards said.
For some companies, luring employees is as easy as a sexy address and fun amenities. Shutterstock is headquartered in the Empire State Building and its space has a Ping-Pong room, drinks on tap and free food.
"Working at the Empire State Building and telling people I’m based out of there is a statement," Shutterstock Head of Global Facilities and Operations Razia Ferdousi-Meyer said. "Retention is already important for us, and we’re wowing the interviewees we're bringing to the Empire State Building."
Tumblr is based out of Midtown South's trendy Flatiron District, which does not have an Empire State Building or Plaza District-style office product. Many of the buildings are old, nondescript with awkward floor plates. But their affordability and location was a draw as tech firms were first growing in the city, despite the warts.
"We did not move into a building that had any amenities. It was very ugly," Tumblr Head of Office Experience and Events Megan Leet said. "It had fluorescent lighting, cubicles, all that shit. We saw it as kind of a blank canvas. We can tear all this down, expose the brick, make it homey and cozy and open."
Tumblr started with half of a floor, but eventually expanded into multiple floors at its building, taking over the rooftop as well as a ground-floor retail space.
"It was a strip club when we moved in," Leet said. "When the strip club went out of business, we got that floor and turned it into our events space, which was kind of the highlight of our office and the thing that made us really special. A lot of companies want to be able to host events and bring people into the space and have communal areas for their team, so for us to build that was just fantastic."
Tumblr's office experience could serve as a cautionary tale for developers who focus too much on check-the-box amenities. It is still unclear in most buildings how many of the fancy amenities get used and whether building out a best-in-class, 15K SF fitness facility is worth it.
Jonathan Kaufman Iger, the CEO of William Kaufman Organization and its Sage Realty Corp. subsidiary, said "amenity creep" has taken hold of the office market as developers build amenities to have, not necessarily with a plan in mind.
"I don’t think most landlords are actually being thoughtful about it," Iger said. "It was an arms race. That guy’s doing it, so I need to do it. It was more about marketing, it was a lack of understanding of what the tenants need."
When the conversations reach what tenants crave most, flexibility is the No. 1 buzzword of the day. It is a major driver in the growth of the sector's biggest disruptor, co-working. Newmark Knight Frank Tri-State President David Falk said co-working and flexible-office providers are the biggest difference in the office market from five years ago to today.
"Tenants can have choices and there is a solution for them, and it’s coming all over the city," he said. "WeWork, in one year, will be the largest non-government tenant in Manhattan. There are companies from Tel Aviv, Munich, LA, Chicago, all coming here and opening up large facilities to meet what they believe is a need."
Serendipity Labs is one of those companies, offering a more upscale experience — no kegs or games, Director of Enterprise Sales Susan Harrison said — than WeWork at its first New York City location at 28 Liberty in the Financial District.
"The majority of what we’re hearing is [tenants want] flexibility," Harrison said. "That comes not only from a lease term but also the flexibility of the space. They want to expand and contract as they need to."
SL Green Director of Leasing Steve Durels said new construction is the biggest differentiator in the office market today, with new buildings like those in Hudson Yards — or the Midtown East supertall One Vanderbilt that Durels is working on leasing up — drawing a majority of tenant interest.
That interest stems from what companies value most, according to Equiem CEO Gabrielle McMillan: flexibility, food and well-being. While there is no one-size-fits-all solution to getting that balance right, those three elements all feature prominently in new construction, she said.
While the amenities arms race might be dying down, developers and brokers still see the value in building cool features that leave a mark. Flexibility might be the most important feature of making a space marketable, but it is not as memorable as a killer amenity.
"After looking at property after property, when the broker asks “What do you think? What do you remember?, they say ‘I remember the property with the swimming pool,'" Shannon said.