Let’s reflect for moment about what it was like to work in an office several years ago – meaning, in this case, the actual desk arrangement.
It may have been in an older building or a new green structure. It may have been in an area with a number of nice amenities, or maybe not.
Was it in a traditional office building, complete with opaque walls or a cubicle? On the other hand, plenty of workers had already joined the telecommuting revolution, to one extent or another, by that time.
Those are among the questions and observations that companies are concerning themselves with today, as they contemplate the size, the shape and the vibe of the space they want in the coming years.
The world is getting greener and greener, and that means that some companies may want to buy, build or lease a green building; but part of the green approach is keeping cars off of the road. So if they’re in a business where employees can telecommute, great.
But when those employees can’t work at home or simply opt for the accoutrements of an office setting, they are coming with greater expectations, like ample nearby retail and services, as well as an enhanced work enviroment.
That can include a party deck, perhaps with an installed bar; or a game room to play a little Foosball or watch SportsCenter during normal office hours and beyond, as happens locally at Merkle’s headquarters in Columbia Gateway Business Park.
So, what’s this? Fun, comfort and convenience at work? What would our grandfathers say?
The Need, The Want
As for such amenities, “They’re in high demand among today’s tenants,” said Scott Wimbrow, senior vice president and principal for MacKenzie Commercial Real Estate Services in Annapolis. And most of them want more amenities than just an obscure deli and a small shop or two.
Wanting more means wanting convenient access to day care, fitness centers, neighborhood retail such as cleaners and upscale retail stores, such as what’s available in a location like Maple Lawn or Annapolis Town Centre.
Tenants also are taking greater note of green elements, not just of the building, but of the area around it, as well. “They want trails and outdoor leisure areas,” Wimbrow said.
It’s all leading to more eclectic layouts. “[Office design] is no longer about the [executive team] having larger offices. They want to be part of a successful team,” he said. “That might mean an open ceiling or an unfinished floor, as opposed to that closed office feel that we’ve seen so much of” over the decades.
“Everyone seems to be going to more glass, because glass gives an office a more open feel,” he said. “That leads to more collaboration among the ranks.”
Wimbrow noted the example of Merkle.
“Many tenants want those kinds of amenities,” he said. “I don’t see a back deck with a bar as a major demand today, but during the workday people want a different environment to increase creativity and productivity. And tenants and employers are proving how they increase their bottom lines by working in those environments.”
Office Space: A Perk?
Dianna Wilhelm, president of Wilhelm Business Enterprises in Annapolis Junction, as well as the National Association of Industrial and Office Properties’ Maryland chapter, also stressed the importance of that overall comfort of the workplace.
“Amenities are extremely important to today’s tenant, not just in a given area, but in their actual buildings,” Wilhelm said. “We’re seeing more buildings with fitness centers, game rooms and gathering areas for group discussions. Even though more people are telecommuting, companies still want that.”
Tenants often target younger employees, and those potential hires want those special amenities in what she terms “not so much a fun environment as a collaborative environment.”
While that collaborative work environment often proves productive, Owen Rouse, principal with Manekin LLC in Columbia, is among those who see a building’s geographic location as big part of the answer today, just like it is with the numerous mixed-used projects that are underway in the area.
“As the labor market tightens up, certain companies will use their commercial real estate holdings as a recruiting tool,” said Rouse. “If you’re in a building near Arundel Mills, for instance, there are seemingly 100 restaurants to choose from. If you’re in a building that also happens to have ergonomically-correct cubicles, that’s all the better. Such amenity-rich environs are becoming more of a separating tool.”
He also was quick to note that Columbia Gateway — the home of Merkle, as well as Manekin’s new-ish green headquarters — “is incredibly sterile.
“There is an absurdly disproportionate amount of nice office space to any amenities,” said Rouse. “We have two restaurants and some delis underneath stairwells in a couple of buildings. That’s it. And you’d never know they’re here.”
Another reason landlords needs to offer amenities is that rents are very competitive, “to the point that landlords are often forced to renegotiate a lease at a more competitive rate — or tenants shop around,” said Lisa Sullivan, vice president, city manager, with Liberty Property Trust in Columbia.
Such flexibility within the lease structure is key for today’s tenants, “due to the uncertainties in the economy and because circumstances change much faster than they used to,” Sullivan said.
She remembers the drill. It really hasn’t changed that much.
“Earlier in my career, I was on the tenant side and we’d asked for all of the same options and flexibility that tenants ask for today,” Sullivan said, “but the opportunities to employ that flexibility were intermittent.
“Now, I’ve been on the landlord side for more than a dozen years,” she said, “and today, due to the uneven economy, we’re seeing those options being employed by the tenants much more frequently.”
And that can be a negative or a positive. “We have several tenants in our portfolio that are growing, and at a quicker pace than they had imagined,” Sullivan said, “so this flexibility is allowing them to react quickly to their markets.”
Stability Through Change
Ask five brokers what they’re seeing in the market and you might get five different observations about its evolution, “so there is no one trend in this regard,” said Cathy Ward, senior vice president of asset management and leasing for Corporate Office Properties Trust in Columbia. “Some tenants still want to lock in for 10 years, others want five years, with an out at three.
Ward noted a few shifts in the market, too, such as an increase in telecommuting and greater reliance on electronic storage. That means that the space used to store file cabinets is often being deemed unnecessary.
“Why pay rent on all this paper storage in offices? That’s becoming a focus,” she said. “With the cloud, no servers are on-site. That’s part of why employers who used to want 225 square feet per employee now shoot for 140 feet.”
To Ward, it’s all just part of the latest change in the office market.
“These trends take place over time,” she said, “but what clients are clearly looking for is stability with a landlord who can provide that flexibility they need.”