In general, the office sector is a new and different animal today. I spoke with Brian Leary, President of Commercial Mixed-Use and Ned Austin, VP Marketing and Leasing, both with Charlotte-based Crescent Communities, LLC. The company actively owns and manages office developments today.
Specifically, they are familiar with office space in a mixed-use environment. For retail and multifamily, there is a lot of mixed-use, but it’s rarer to find office space in these types of developments. However, when you do, there are some advantages to being an office tenant in a mixed-use development. Specifically, amenities and having access, mobility and options to walk out of your office space.
Leary said the tightest submarkets across his company’s footprint (from mid-Atlantic to southwest) that have mixed-use of amenities proximal to where the office can be, are driving a premium from a rental rate and from an absorption standpoint for office space.
In a mixed-used office environment, think beyond typical office amenities like parking, efficient floorplans and fast elevators, and think bigger. “It becomes experiential and has lifestyle amenities on top of collecting rent,”
People running companies today are concerned about retention, recruiting, and attracting the best talent as the job market improves. Austin said that 10 years ago when a company was deciding on office space, it was about the company’s needs, but now it’s more about the employee and the employee experience.
It’s no secret that baby boomers are on the way out and millennials are on the way in. Many corporations with big boomer workforces are looking at 50% retiring over next 10 years. And there has been a shift in the employee mindset that corporate America is starting to embrace—and that’s work where you live (not the other way around).
In the past, the CEO lived in the suburbs, but now the CEO knows that he or she needs to drive to where the employees live. That’s not to say mixed-use developments can’t thrive in a suburban environment. Infill suburbs can have a mix of uses, such as the Central Perimeter in Atlanta or Uptown Charlotte, said Leary.
If you don’t create a commercial community that people want to linger longer and are excited to work at, then you are going to have a hard time getting talent. “Talent today will go where they are happy working and living, not necessarily what company they want to work for,” said Leary.
Of course there can be challenges with the development, management and operations of mixed-use developments. First off, if it’s new construction, using a team that has done it before is important. From a design and construction standpoint, you want to protect parking for office users and provide parking for retail users and take advantage of opportunities for public space with private escapes.
From a management standpoint, these types of developments should have concierge-like service to engage with tenants as partners in the community. Like walking into an Apple store or the “Starbucksization” of America. Call it what you want but it’s not just millennials that want this type of attention.
In addition, legal documents are paramount to these types of developments as entities have to work together. It’s best to determine certain situations, like parking, easements, and who pays for what up front.
While it might be rare, and still not the norm, office in a mixed-use environment is indicative of the direction the sector is headed and of a shift in commercial real estate trends overall. There’s been a shift in retail to experiential and it’s evident that this is carrying over into office and multifamily as well. These days, people want to live, work, and play in the same place.