Changing the Office Landscape: Becoming 24/7 Environments

Members of today’s workforce do not clock in and out of their jobs, maintaining the same strict separation of work and personal life as the previous generation did. While this means employees are more accessible to their employers outside of traditional business hours, it also means that employees expect their offices to share many of the conveniences and luxuries of their apartment buildings. This trend paired with a job market that favors employees over employers gives companies no choice but to adapt and accommodate.

Consequentially, commercial landlords who hope to land high credit tenants have to look at residential assets and determine which amenities and programming makes sense for the building’s profile and population.

Bob Alexander, chairman of CBRE (CBRE)’s N.Y. tristate region, posits, “In today’s times, executives focus on creative ways to recruit and retain talent…Finding the appropriate building with the right amenities can help secure a prospective tenancy.”

Long gone are the days where state-of-the-art operating systems, fast, reliable elevators and pristine lobbies are enough to court tenants. Today’s commercial landlords are expected to market to every level of a company, which is accomplished through the hospitality lens. Adopting hospitality as a service model will inspire grand and granular changes, but in the end will create a sense of community and engagement throughout a building. No other company recognizes and understands this trend more than RXR Realty.

RXR, a vertically integrated owner, operator and developer in the New York Metropolitan area, has successfully transitioned amenities into place-making and building-wide communities through innovation and strategic partnerships that complement the asset’s profile.

For example, 530 Fifth Avenue is a premier, Class A office building located just two blocks from Grand Central Terminal. Tenants include leaders in entertainment, spirits, fashion and more; industries that thrive on collaboration, creativity and outside-the-box thinking. These preferences could be met through RXR’s partnership with Convene; the relationship is extensive, allowing the pair to experiment and innovate on new models to perfectly meet the tenants’ needs.

Paul Ferraro, SVP at Jones Lang LaSalle, went as far to say his team “targeted 530 Fifth Avenue exclusively because Convene was moving into the building.” Their client, the architecture and design firm Vocon, recently signed a 15,000-square-foot lease on the 16th floor with plans to utilize Convene’s amenities and conferencing space.

Bob Alexander built on this when discussing RXR Realty’s amenitization strategy at 32 Old Slip, a Class A office building located in South Street Seaport in Downtown Manhattan.

“RXR has done an excellent job recognizing the importance of providing tenants with the types of amenities their employees and future employees have come to expect,” he said. On the asset’s specific qualities, he said, “The building boasts an easy access bike room, large tenant-only garage, event and conferencing space through Convene and, coming this summer, a high-end coffee bar with soft seating conveniently located in the eastern portion of the lobby.”

While these categories of amenities are relatively easy to implement to satisfy tenants, RXR has taken their strategy to the next level and incorporated its building amenities into its business plans via its retail availabilities.

We are seeing brick-and-mortar businesses struggle around the country with the rise of eCommerce; the US Department of Commerce reported 9.7 percent of total sales in 2018 were e-commerce sales, an 8.9 percent increase from 2017.

This trend allows large, name-brand chains to become increasingly attractive to landlords who are looking to sign leases and receive steady rent payments. However, RXR has different motivations and looks at retail differently: The firm believes retail is everything, that it’s not the literal leasing document that brings an office tenant into a building.

RXR sees itself as a member of the communities in which it does business. For RXR, this means servicing its tenants as well as the neighborhood. By applying this mindset to its retail strategy, RXR is creating common spaces where individuals reap the benefits whether they work in the asset or live in the surrounding area. It’s not about signing a lease, it’s about place-making. Two examples of this would be the Starrett-Lehigh Building in West Chelsea and The Hall in Brooklyn.

Starrett-Lehigh is a 2.3-million-square-foot asset located between Hudson Yards and Meat Packing on Manhattan’s west coast. West Chelsea is one of Manhattan’s submarkets that is still maturing; this has been catalyzed by Hudson Yards, as well as the growing residential population. Understanding the hunger for more, RXR devised the building’s 42,000-square-foot ground floor redevelopment project to meet the needs of the 5,000-plus tenants in the building and local population.

Starrett-Lehigh’s retail experience will include a food hall able to service coffee to cocktails, a corner restaurant on 26th Street and 11th Avenue as a new opportunity for fine dining and a collection of inline retail opportunities for neighborhood amenities ranging from beauty to fitness. Additionally, the space will feature over 5,000 square feet of multimedia event space, creating a one-of-a-kind venue on Manhattan’s west side as well an irreplaceably convenient turnkey rental for the 170-plus companies in the building who are frequently in need of space for sample sales, fashion shows, photo shoots, social gatherings and product launches.

The Hall, a 10-building complex located in the intersection of the Brooklyn Navy Yard, Williamsburg and Fort Greene, will similarly utilize its ample retail space to service the commercial office tenants and the emerging neighborhood community. The campus will feature a food hall, biergarten, conferencing center, art installations and outdoor areas conducive to film screenings and concerts. The project’s business plan is centered around the ecosystem of community where building amenities service tenants and visitors alike, while giving them opportunities to not only coexist but communicate and collaborate.

Beyond providing the physical spaces, RXR orchestrates tenant programming to further encourage building-wide community. RXR robustly tracks these activities to understand the features that serve its community. Interestingly, FIRE, TAMI, and professional services tenants participate at similar levels with participation ranging from associate to partner level employees. More than just free yoga classes, over 18 percent of 2018’s programming was educational. Programming within this category had the highest attendance—45 percent of the thousands of guests attended at least one educational activation throughout the year.

Engelbert DeCastro, founder of DBS MGMT and tenant of Starrett-Lehigh, has found long term value in this.

“I’ve been in the building for six years and could never imagine leaving,” he said. “RXR has worked tirelessly to make improvements on the building including a communal lounge right on my floor serving as great break-out space. The events hosted are not only opportunities to learn and have fun, but also [to] network and form meaningful business connections.”

The building’s dog-friendly policy welcomes all sizes, which DeCastro also mentioned was “a huge benefit for my two Great Pyrenees.”

An office building’s amenities and retail tenants can create a self-sustaining ecosystem for a landlord, keeping tenants within the building throughout the work day. However, it is this strategy and belief in place-making that truly creates lasting value, not only for the asset, but the community. RXR Realty is truly a believer in this approach, not following the trend, but leading the social innovation necessary to thrive today and in the future.