Attract Millennials, Other Tenants With Common Space Improvements

Aging properties increase competitiveness by repositioning facilities with moderate investment in renovation and rebranding.


https://facilityexecutive.com/2016/04/repositioning-properties-changing-workforce/
Aging properties increase competitiveness by repositioning facilities with moderate investment in renovation and rebranding.
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Repositioning Older Properties, For A Changing Workforce

Attract Millennials, Other Tenants With Common Space Improvements

By Joshua Zinder AIA, NCARB, LEED AP and Marlyn Zucosky, IIDA

The return of stable economic growth has done a little to spur new construction in the commercial office property sector—but maybe too little. As some owner-developers and facility executives have seen, there are significant benefits from investing in savvy, targeted renovation and repositioning projects for tired office buildings and parks. Not the least of them is the ability to rise above competitors in markets with a glut of leasable space.repositioning

It’s a question of quality—but also a question of knowing what today’s younger workers and more demanding companies want in their next headquarters. And with many property upgrades, it’s a chance to make current tenants happy by helping them love the places they already like.

Plus, the pressure is on. According to recent research by real estate services firm JLL, New Jersey office tenants report that they “overwhelmingly prefer” to locate in Class A facilities. For most of them, that is not merely aspirational: Between 2014 and 2015, vacancy in Class A office space was down a full percentage point—and vacancy in Class B space was up by the same full percentage point. This trend can be seen in many markets nationally. So what can be done with Class B properties if low rental rates aren’t enough to make them competitive?

The answer, of course, is to look for smarter, more market-focused upgrades.

Enterprising real estate investment groups have identified this segment of property rehabs as an opportunity. They are scooping up well-priced, older assets with an eye toward repositioning them for the needs of growing industries and today’s young workers. The cleverest of these investors recognize that the assets can be made competitive with a moderate investment in renovation and rebranding. This strategy succeeds surprisingly well when the new owner works with an integrated design team, whose expertise includes adapting the facility to operate efficiently and profitably as well as designing to accommodate the needs and desires of the rapidly changing workforce.

This latter goal is significant. According to research by Amy Lynch with Generational Edge, millennials comprised 36% of the workforce by 2014, and by 2020 that number will be 46%. Millennials view their work life quite differently from the ways previous generations did, and employers know this. Tenants looking for class A rentals are thinking about their ability to recruit, and are more likely to lease space within facilities that are attractive to their biggest recruitment pool, the millennials. But what makes a property attractive to this demographic?

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The investor, Boston Properties, upgraded three floors of common area and the lobby at this property, 101 Carnegie, which is described below. (Photo: courtesy JZA+D)

Class A Quality, On A Budget

The answer is, in a word, amenities. Though the specifics may vary from property to property, the general idea is to create informal, attractive space for working, collaborating, and relaxing. In addition, many young members of the workforce are also attracted to workplaces they perceive as forward-thinking. So sustainable design strategies offer added value: they make a property healthier for occupants, save on operating costs by capitalizing on energy efficiency, and provide an advantage for prospective tenant firms when recruiting.

Similarly, carving out shared amenity spaces, which seems at first blush to provide little in the way of return on investment (ROI), presents a potent win-win scenario for the owner and the tenant. The availability of shared amenities raises the per-square-foot price, but tenants can shrink their footprint—and their rent bills—because they don’t need as much amenity space of their own. It also may add new revenue streams, and the owner benefits from the retention of tenants in many cases.

The success of this type of upgrade hinges on the ownership’s willingness to invest time and resources for renovation and rebranding. This almost always means new ownership: it is very rare that an owner who has seen an aging asset lose value over time will be willing to commit to this process (though we recommend they try). Most often they will want to sell. It is the buyer groups, such as REITs, acquiring the older asset who will invest in an upgrade. And as previously mentioned, successful repositioning also requires that the owner engage a thoughtful, experienced design team who understand the ins and outs of the buildings themselves as well as the market. Integrated design firms tend to win many of these commissions, as they provide everything from architecture and interior design to product, furniture and graphic design as well as branding strategy and other market focused services. These types of firms can make quick decisions and help envision cohesive, impactful environments.

A few examples of such strategic repositioning upgrades are found along the business corridor that runs through Princeton, NJ, a haven for pharmaceutical, tech, consulting and other companies. While some of the examples, designed by the nearby integrated design firm JZA+D, focus on longer periods for return on investment (ROI), the initial outlay in each case was moderate considering the scope of the work, and the resulting value improvements.

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Before and After: 1 & 5 Independence Way exterior (Photos: left, courtesy JZA+D; right, by Michael Slack, courtesy JZA+D)

1 & 5 Independence Way

The dated building design and undefined entrances of these properties provided a rebranding opportunity. The addition of the exterior canopies and redesign of signage (seen above) created a visual connection between the entrances of the two buildings—though they are separated by Building Number 3 in between, the brand identity is evident.

The lobby interior was updated to be brighter and more usable (seen below). Removing a large planter installed in the floor opened up the lobby to use as a lounge. Light-colored finish materials and stylish furnishings combined with efficient LED lighting make the space an amenity to be enjoyed even as energy costs are reduced.

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Before and After: 1 & 5 Independence Way lobby (Photos: left, courtesy JZA+D; right, by Michael Slack, courtesy JZA+D)

101 Carnegie Center
In upgrading three floors of common area and the lobby of this property, the investor Boston Properties, the large commercial developer operating in four major national markets, decided that adding amenities was a major focus. With a millennials dominated workforce in mind, the design team dramatically upgraded the space for food service and added a fitness center and an after-hours kiosk to accommodate the needs of those working nontraditional workdays.

As with other properties, care was taken to make spaces lighter, brighter and more cheerful. For example, brick walls running from the outside into the lobby made for a somber entrance. The new design replaced the heavy dark masonry brick with light-colored gypsum wallboard and a pop of interspersed wood paneling. Ceiling-hung LED pendant fixtures in the three-story high atrium also contribute to a brighter, more communal lobby and entry experience.

506 Carnegie Center
Also conceived by Boston Properties and JZA+D, the transformation of this property will include (when complete) upgrades to the first and second floor public spaces, including a café as well as an exterior patio for outdoor dining. Furnishings inside and out focus on community tables, which encourage informal interaction.

Upgrading the patio with a barbecue, gazebo, and seasonal bar will create a gathering space that would save tenants much of the cost of renting in a hotel or convention center for private events, such as the splashy product launches often hosted by pharmaceutical companies.

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Before and After: 506 Carnegie Center lobby (Photos: left, courtesy JZA+D; right, by Michael Slack, courtesy JZA+D)

The project also involves updating the lobby (seen above), kitchen, servery and bathrooms (please note, hands-free bathroom fixtures are not optional anymore!) and the installation of an after-hours “grab-ngo”food service. Furniture of natural wood in the updated café provides a relaxed, loungey feel, and hanging light fixtures create warm, intimate gathering spaces.

All millennials seem to want a Starbucks in their buildings, but it’s not always possible. With some smart upgrades and savvy branding, however, a good repositioning design can at least create the impression of something just as convenient and a lot more unique.repositioning

Zinder, AIA and Zucosky, IIDA are partners in Joshua Zinder Architecture + Design. Located in Princeton, NJ, the integrated design firm’s global portfolio includes commercial, hospitality, retail, and residential projects, as well as product, furniture and graphic designs.

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