As recently as 10 years ago, the vast majority of commercial office tenants leased empty office space and had it customized. Then, landlords offered tenants offices that were generic in design and inexpensively pre-built: a series of private offices, an area for cubicles, and a conference room. Over the past several years, a new trend has taken hold: not only are office spaces offered for lease completely pre-built, these days the pre-built offices can be expected to match the quality and attractive, contemporary design of custom corporate interiors.
How can landlords pre-build offices that would suit yet-unknown tenants? The answer is an experienced architectural and property management team that thinks like a landlord, closely follows local and national leasing, design, and workspace organization trends, and has an eye toward thoughtful layouts that appeal to many types of businesses.
Daniel Montroy, AIA is one such architect and his firm, Montroy Andersen DeMarco Architects (MADGI), comes complete with its own Landlord Services Studio, working alongside New York City commercial owners, property managers, and leasing teams for 25 years. Montroy has designed more than five million square feet of pre-built and build-to-suit offices in Manhattan for the likes of CBRE Group, Colliers, George Comfort & Sons, Atlas Capital, and Equity Office.
So what is the key to designing the spaces tenants want? Montroy says the skill requires “an understanding of market positioning, technology, budgets, and aesthetic and workplace organization preferences of varying businesses.” An architect’s role, he continues, “is to incorporate these factors into economical, well-designed programs that maximize property owners’ revenues, while impressing prospective tenants.” The greatest challenge, says Montroy, is that a pre-built “must appeal to everyone, which is very hard to do.”
Montroy considers pre-built offices to be among the toughest design assignments. “These projects call for much more than design abilities,” he says. “The designer has to think like a leasing agent and asset manager, and suggest the most beneficial solutions to the landlord—the best use of the budget, the most promising tenant segment to target, the upgrades that will increase rent rolls.”
Most recently, this often comes down to what Montroy calls the “tech loft”—open loft-like spaces with minimal private offices and plenty of social space. “It used to be that the majority of pre-builts were just generic ‘plain vanilla’ boxes,” he explains. “Now the majority—maybe up to 75% in certain areas and properties—are tech lofts.”
In part, it is because the boxy and generic “vanilla” office no longer appeals to the majority of tenants, particularly those in the tech and media sectors, which are coming to New York in great numbers. Montroy refers to them as “TAMI” industries, a term that encompasses technology, advertising, media, and information firms. TAMI companies and many other types of businesses seem to want high-density spaces with glass divider walls in conference rooms and the few remaining private offices, as well as attractive social spaces, visible MEP systems, and eye-catching, quality finishes. They also like the ability to move in quickly to accommodate their rapidly growing staff and appreciate the flexibility of the space to morph along with their increasing ranks.
He also notes that in many instances, the more walls, doors, and offices one builds, the less attractive the space can be to tenants, as the greater the margin is for error. “Get the space ‘wrong,’” Montroy cautions, “and you limit the number of tenants who will want to rent it.”
“It’s a real credit to landlords that they’re investing in high quality pre-built spaces,” says Montroy. “We’re bringing the same design expertise and quality to landlords as we do when working directly with tenants.”
Landlords seem to be competing to offer the best pre-built spaces in pursuit of quality tenants. In Montroy’s experience, landlords are spending as much as tenants. Even though today’s pre-builts are built with less interior features, they are more expensive than the average “plain vanilla” office installation. Removing the ceiling and exposing ductwork and mechanical systems still has to look good, for example. They can no longer simply be hidden behind a dropped ceiling; today’s pre-builts feature ceilings that are conscientiously designed and attractive. Architects work alongside engineers to ensure aesthetically pleasing mechanical layouts that complement lighting fixtures and other interior elements.
“The best pre-builts lease themselves very quickly,” says Montroy. “Tenants come in, look around, and say, ‘I want this.’” He tells the story of a 13,500 square foot office at CBRE-managed 218 West 18th Street in Chelsea, a space that was leased, as he puts it “before the paint was dry.” It is a tech loft with two private offices, a social space, a pantry, and an open-plan office section. The tenant, YieldMo, an Internet company, had its own architect advising them and making some minor modifications, but it was a successful enough space to lease before completion.
A 12,000 square foot tech loft space at the 24-story, 300,000 square foot 180 Madison Avenue, managed by CBRE, is another example. Montroy explains that tenants have been moving right in, doing “surprisingly little work.” “They don’t want to do anything beyond installing furniture, telephones, and computers. They want their new space to be plug ’n play,” he adds. Whether it is a full floor or a multi-tenant layout, he notes, “They all want an open collaborative workspace with a loft aesthetic.”
CBRE’s Laura Bruno, real estate property manager of 180 Madison Avenue, concurs. “The trend of the quality pre-built is here to stay,” she says. It is something tenants are learning to expect from building owners. In her experience, the pre-built tech loft and the vanilla office has an even spread of “about 50-50” depending on the building location and the market position. Bullpen seating—concentrated open space with lots of desks—and a high-end social space “makes the space much more attractive to tenants,” she continues.
While at 34th Street, 180 Madison is a bit outside of the so-called Tech Corridor popular among technology firms. Montroy nevertheless felt that a loft-type space there would attract high-tech tenants. Indeed, the first 12,000-square foot floor MADGI built there was leased quickly by such a company, Rubicon Project, so CBRE commissioned MADGI to design two more pre-built floors plus the building’s lobby. Another floor was leased quickly, this time by three tech companies, specifically Bright Cove, Evolution Markets, and Global Investment Renewable. Each floor takes between six and nine months to complete. “MADGI was very knowledgeable about the market and came up with design solutions that were instrumental in attracting the tenants we desired,” says Bruno.
MADGI also developed a repositioning program for Colliers International, for its 193,000 square foot 655 Madison Avenue. The landlord saw an opportunity to increase revenues by upgrading the property. MADGI devised a plan that included pre-built offices, infrastructure improvements, new terraces, and interior layouts that took advantage of large windows with views of Central Park.
For property managers and leasing and asset management teams looking to market newly available spaces, Montroy recommends first analyzing the local market. “Review opportunities for attracting tenants in the fast-growing technology industries,” he says. Then, establish what an achievable rent level will be. In collaboration with an architect, establish the desired cost per square foot of the pre-built office, keeping in mind the expected rent. Finally, develop a design that fits within the construction budget, while attracting the targeted tenants. “If your target is in the TAMI sector, a tech loft and higher-end finishes are the way to go,” he adds.
The pre-built tech loft is going strong and “will continue to attract tenants for the foreseeable future,” says Montroy. Be prepared to spend money on higher-end attractive finishes, he continues. The money and care spent seem to be worth their weight in leases these days.