Winning the Amenities Race
Regardless of whether the market may be slowing, it’s clear that building amenities are quickly becoming a competition in commercial real estate.
The idea of including amenities is nothing new, but as the market has continued to grow more and more competitive, both landlords and tenants are focusing on amenities that set one location apart from another.
“On-site amenities are highly valued by the marketplace, both existing tenants and new prospects desire common spaces that add value to their business and their employees,” says Glenn Verrette, an Executive Director at Cushman & Wakefield.
For properties which can support them, rooftop decks and outdoor spaces have truly taken off, with outdoor fireplaces and skyline views serving as stunning backdrops for special events, meetings, or simply lunch outside. Others have focused on lobby renovations or the creation of other common spaces to bring more to a property.
Gensler’s Thomas Vecchione has noted that portfolios now dedicate 10 or even 12 percent of their space to amenities – a far cry from the three percent ratio a decade ago.
“Ten years ago, it was ‘good enough’ have a sandwich shop, a bank, and a shoe shine,” says Verrette. “People today work differently and ‘good enough’ doesn’t cut it.”
Food service remains a focus for many suburban properties, with John Boyle, Vice Chair at Cushman & Wakefield, saying some tenants are hesitant to look at space where food services are not located in the same building.
“Even if a property has a full cafeteria in Building B, it’s an issue,” says Boyle. “Especially if you need to walk 700 yards outside when it’s 10 degrees in February.”
That focus on food can be seen in a number of recent projects, such as Wolverine’s new headquarters in Waltham, which includes a café which features local food despite the fact that CityPoint has other dining options.
Employees focused on health and fitness are also interested in on-site building fitness centers, as well as shower facilities and weather-protected bicycle storage. Almost 2% of Boston employees bike to work each day. While that’s a relatively small percentage, it’s also a portion of the workforce which has increased in five consecutive years.
The growth of the electric vehicle market has also increased interest in adding car charging stations to parking facilities.
“All of these properties are competing for the same tenants, just as those companies – by and large – are competing to attract and retain talent,” says Will Foley, an Executive Director at Cushman & Wakefield. “When done well, a building’s amenities can be an added resource to help companies recruit and keep the best and brightest.”
The importance of amenities extends not only to Trophy and Class A properties, but also to Class B and C buildings. In a building where each tenant may not have dedicated meeting space, access to a shared conference room can provide value to tenants while also creating revenue for the property owners from unused space.
Other amenities, such as distributed antenna systems for better cell phone reception, modern card-access systems and even elevator upgrades – can also serve as a valuable differentiator in the correct situation.
One thing is clear, tenants in the market are looking for properties with new, higher-end amenities which add value to the space and will appeal to their employees.
And owners are clearly responding.