Western Real Estate Business

MAY 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

Issue link: https://westernrealestatebusiness.epubxp.com/i/978056

Contents of this Issue


Page 48 of 66

46 • May 2018 • Western Real Estate Business www.REBusinessOnline.com SHOULD WE STAY OR SHOULD WE GO? A PROACTIVE APPROACH TO RETAINING VALUED TENANTS By Susan Dwyer, Architect, H. Hendy Associates in Newport Beach, Calif. The allure of cre- ative spaces,new of- fice developments and the need for enhanced collabo- ration and amenity spaces means many of today's office tenants are discov- ering their current legacy space no lon- ger vibes with their company objectives. On the flip side, a tenant may find it has too much space or desires a reconfigured environment to support an expanding workforce, resulting in thoughts of relocating. Education on the current market land- scape is crucial before any next step is taken. This is especially pertinent as construction and labor resources remain in tight supply and new office availability remains low. The fact is, most tenants don't want to move. It's human nature to fight change. Relocation also comes with a list of major inconveniences. Namely, a disruption to the organization and clients, smaller new tenant incentive packages and unforeseen costs of pay- ing for a new space. New tenants can expect to pay $196.49 per square foot for a new office space in the U.S., ac- cording to JLL's 2017 U.S. Fit Out Guide: The Real Cost of Building Out. Meanwhile, tenant improvement al- lowances are merely $43.61 per square foot on average. Listen and Retain Valued Tenants Building owners work hard for five to 10 years to strategically develop a post-lease positive relationship with a tenant, but oftentimes fall short when it comes to negotiating a lease re- newal. Landlords should proactively approach and address their tenants' needs to improve their chances of re- taining existing clients. Providing a workplace evaluation to all or part of the tenant's employees is one way to accomplish this. The evaluation helps the landlord understand how a space is or isn't working for the existing ten- ant. In doing so, landlords stand to make a powerful play in retaining a valued tenant, while also maintaining building profitability. Tenants go through this process ei- ther way, so consider developing a formal program that answers: • What is the tenant's right size? What will its growth requirement be in the future? • What is working well (or not work- ing) in support of the company and its employees (i.e. building amenities, parking, location, HVAC)? • What office workplace components are vital for retention success (confer- ence room, breakout areas, natural light, etc.)? Going through a pre-renewal pro- gram process with valued tenants can shed important insights on the real motivators behind a desire to move. In the end, these actions can pay for themselves several times over in sav- ings both at the time of renewal or re- location, and over the life of the lease. They Want to Stay… Now What? Obtain Professional Advice New workplace design must, first and foremost, promote the company's business objectives. Transitioning to a new workplace environment relies heavily on communication, observa- tion and designing with performance- based solutions in mind. Tenants who work with an interior architect to tack- le workflow programming can assess movement of work throughout the space. They can also identify techno- logical solutions that can be integrated in the design to enhance internal and external communication. In fact, im- proved technology that works hand in hand with deliberate space design is proven to increase speed to market. Get Them Excited and Make It Easy Savvy landlords are realizing the dividends that arise from work- ing with tenants to meet their needs throughout the remodeling process. Seek guidance from an interior archi- tect for space planning and logistics schedule development to show ten- BUILDING A BUSINESS Today's changing workforce has created a variety of design and configuration strategies surrounding office space. DEVELOPERS AND INVESTORS ARE GETTING CREATIVE IN ORDER TO MEET SOCAL'S RISING DEMAND FOR CREATIVE OFFICE SPACE By Lisa Tamayo, Vice President of Development, BLT Enterprises in Santa Monica, Calif. Traditional and outdated office space isn't the only thing getting cre- ative these days. Investors and de- velopers are increas- ingly stepping out of the box and com- ing up with unique solutions to meet to- day's rising demand for creative office space. This is especially true in dense ar- eas like Los Angeles where an influx of demand for high-quality creative space meets a lack of quality reno- vated product. Much of the inventory in prime Los Angeles submarkets, such as Silicon Beach, Santa Monica and West LA, consists of high-rise of- fice space. This is not necessarily the type of space that is conducive to the needs of today's tenants. Some of this product is also trading at prices above replacement cost that do not justify a creative conversion. As a result, developers and inves- tors are expanding outside of these markets to areas like Culver City, El Segundo and even Hawthorne in search of unique brick-and-timber properties that can easily be con- verted to innovative office space. The Hawthorne submarket resembles Cul- ver City five or 10 years ago. Large companies are continuing to migrate to the region and its brick-and-timber industrial properties present inves- tors with tremendous opportunity for creative redevelopment. This has led companies like Telsa to recently relo- cate to the region. Investors and developers are also getting creative with the types of properties they are converting into creative space. BLT recently trans- formed a 4,680-square-foot former music studio in West LA into an in- novative and high-quality workspace. The firm designed an open layout that included state-of-the-art upgrades such as exposed ceilings with new skylights, a new kitchen, custom steel doors and windows with a rollup door leading to the outdoor patio. The music studio conversion created value and attracted a high-quality tenant, a design-based animation and commer- cial production company. Low- and mid-size buildings, when compared to their high-rise counter- parts, also better cater to the ameni- ties tenants are demanding, such as outdoor co-working spaces, bocce ball courts and barbeque areas. These properties also provide better access for tenants in terms of parking and outdoor amenities, which are typical- ly located on the ground floor. Access becomes much more difficult in high- rise buildings and less convenient for tenants on higher-level floors. As demand for creative office con- tinues to grow and prices across Cali- fornia continue to rise, investors and developers will continue to take an innovative approach to meeting this growing demand. They will expand into new submarkets and find non- traditional assets that can be convert- ed into creative space, such as indus- trial, retail and even music studios. Tamayo Dwyer A 4,680-square-foot former music studio in West LA was recently transformed into an innovative, high-quality workspace. The open layout features custom steel doors and windows with a rollup door leading to the outdoor patio.

Articles in this issue

Links on this page

Archives of this issue

view archives of Western Real Estate Business - MAY 2018