The fact that companies are taking employees into consideration when they select new office space is nothing new. What is new is the extent to which today’s employers are considering their workers’ wants and needs, as a way to keep them with the company and in its office space, perhaps as many
as 24 hours a day.
At a Development ‘13 session titled “Trends, Demand and Locales: State of the Office Market,” Greg Kraut, principal and managing director, Avison Young, said that this trend started with media companies and large technology firms like Google, many of which put their employees first when it comes to space selection. Google surveys employees both before it leases space and again after it moves in, asking them what they like and dislike about the space.
“Google wants its employees in that space for 24 hours a day, and it thinks that it is productive to give employees food and a bed. It wants the space to be enjoyable,” Kraut said, noting that demand for workers in places like New York City is so strong today that people typically only stay in a job for two to three years. Google wants to ensure — both in its New York offices and at other facilities around the world — that people stay with the company for as long as possible.
Howard Stern, Greg Kraut and Matt Lituchy discuss the needs and wants of today’s office tenants, at the Development ‘13 session “Trends, Demand and Locales: State of the Office Market.”
Matt Lituchy, chief investment officer, Jay Paul Company, reported that his experience with Google in San Francisco confirms this. “We just leased a 1 million-square-foot campus to Google. Much of that product is eight years old, but it is nice space. Google is coming in and ripping out the common areas. It will spend $250 per square foot to ‘Googleize’ the space and turn it into space that is fun to hang out in, where people can collaborate. It is putting in restaurants, athletic facilities and game rooms. They even have a nonalcoholic margarita maker.”
Speakers agreed that although large companies flush with cash will spend considerable amounts on building out interior space, they are demanding rent concessions from landlords in lieu of TI packages. These tenants are telling landlords, in effect, “we have our own cash; we don’t need your TI dollars. In fact, give us as little TI as you can and, in return, we are going to jam you on the rent.” Landlords therefore may be spending less capital, but they also are getting less return.