A Kumbaya Moment for Pre-Planning Landlords With Tenants

By working together landlords are securing tenants for spaces that would have been unoccupied one, two or five years down the road

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It’s something to see two entities with seemingly opposite endgames come together for their mutual benefit. But that’s what’s happening with many of today’s landlords and tenants. Increasingly, landlords and commercial leasers are contracting together to secure future offices that suit companies’ workday needs and landlords’ desires for quality tenants.

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While six months ago landlords scrambled to obtain all-too-resistant tenants, now they and their would-be tenants are taking the initiative in negotiating favorable deals for future joint ventures. By working together today, landlords are securing tenants for spaces that would have been unoccupied one, two or five years down the road, and tenants are locking in future office spaces before their current leases are up. The arrangement takes considerable pressure off both parties—landlords, in what would be an immediate push to find tenants after their current occupants’ leases expire, and tenants’ rushed need to find an available office space when their existing lease ends.

By being proactive, landlords can vet the best possible tenants to fill their spaces instead of contracting with whoever is readily agreeable when the location opens. In addition, tenants can select from a range of available options to find the one that best meets their requirements, rather than having to settle for what’s readily available when the time is up on their current lease. Moreover, because pre-planning for future occupancy gives landlords and tenants time to fill their wants, extended lease negotiations offer a wider spectrum of possibilities, including monetary bonuses and desirable design features, like turnkey spaces that ease the tenant’s transition into the new space, striking lobbies, creative common areas and flexible, multi-use conference spaces.

A recent December of 2017 real estate survey conducted by one of the more prolific owner representatives and project managers in the northeast shows that general contractors and construction managers in New York City are optimistic about their prospects for 2018. In all, the survey indicates, the anticipated increases were beyond earnings for 2016 and 2017 by 9 percent, thanks to the coming year’s project schedules.

In fact, one brokerage firm advises tenants to investigate relocation options two to three years before their lease expires, or earlier, depending on the size of the space, to take advantage of incentives, raw space options and other pluses.

In our work with larger firms, client interest in sublets and moves to spaces that either need renovations or are turnkey stems from the opportunity to refresh or up-the-game of their office when their leases expire. Often, the firms revisit the idea of in-office culture and ways to attract and retain younger workers, a demographic with a reputation for their tendency to comparison shop for workplaces outfitted with desirable features. Many larger firms are following tech firms’ and startups’ leads in bypassing traditional office layouts for more mobile, modern designs and amenities. After all, it’s become hard to deny the benefits of up-to-date, company-specific layouts, including attracting talent plus enhanced worker engagement and productivity. And, while many businesses are interested in elements that work for other firms, they don’t want to duplicate anyone else’s space. The process has companies more closely studying how their business functions to heighten efficiency.

In another scenario, a not-for-profit client of ours has been involved in the pre-design and design of its ultimate space for two years, including a workplace strategy study, visioning and (detailed) programming to help the organization determine its best option, whether it’s to stay in its current location or move into a new one. Whether it takes two years, two months or two weeks to gather data and benchmarking, having a cushion of time to avoid rushing into a lease agreement goes a long way in helping tenants find their perfect space. That’s important, because in some cases rents are going through the roof and in others landlords are looking for lengthy leases, like 825 Third Avenue, where The New York Post recently reported the building’s owner is looking for long-term tenants to take over where the previous, 25-year leasee will leave off when the building empties in mid-2019.

With positive market-based data fueling tenants’ study of their future options and landlords’ focus on filling upcoming spaces before leases are up, a proactive approach to commercial leasing and renting is on the rise. Modern office design isn’t just a trend. It’s a path to productivity. All parties involved would do well to analyze relevant data, be aware of market trends and make smart decisions. Cultural shifts, like mobile and remote working options for individuals and teams, abound and can translate into workday cost savings.

Starting sooner and with the strategic input of an architect can off-set the urgency of having to quickly secure a tenant or space, helping landlords and renters capture their needs and get the agreement right.

Scott E. Spector, AIA, is a principal at Spector Group, one of New York’s premier architecture and interior design firms and a leader in corporate tenant and building owner-based design. The award-winning company has affiliate offices nationally and internationally. To date, it has completed more than 2,000 projects. sespector@spectorgroup.com