Tech and Terraces: Office Owners Look to Expand Their Use Beyond Tenants

“An office building can no longer rely on only the rent-paying tenants to use the space and appreciate it in order to capture its ultimate value,” Colleen Werner, founder and CEO at Lulafit, a Chicago-based consulting firm that works with office and other asset owners to create amenity hubs. 

“We see a lot of trends,” Werner said. “There’s a lot of different elements of the space that are circulating around this idea of, ‘How do we build a thriving hub where tenants and the community are benefiting from the space?’ That means the public is benefiting from the space, and, then, ultimately, the owner and the companies that work there. How do all of these things come together?”

Outdoor spaces in particular can provide a better return on investment for owners, said Werner.

“We built a lot of amenity spaces at the top of towers and it’s hard to get the public up there, so we see them all coming down from them now and recognizing that maybe the view isn’t the most important thing,” she said. “It’s how you use the space. Obviously, there’s a lot of things that are circling around this core question of how do we remain not only relevant in the office world, but how do we take an asset that has had limited relevancy, especially the last few years, and amplify it by exposing it to other users?”

Carla Hinson, vice president for North America solutions at MRI Software, noted that outdoor spaces nonetheless remain “highly sought after, but not readily available” beyond a building’s tenants. 

“Most buildings offer at least five amenities, and many offer more than 14,” Hinson said in an email. “To compete in markets with high office vacancy, investors see the value in going the extra mile.”

Office landlords who want to further open up their outdoor spaces face technology challenges in managing access and use by customers beyond their tenants, said Jonathan Kroll, co-founder and chief product officer at Visitt, a Manhattan-based building operations platform.

“Rooftops and terraces are these beautiful spaces, but most of the time nobody uses them,” said Kroll. “So investors are investing so much money in this and they want to maximize their utilization. What we see right now is a trend of making them also available to the public. Obviously, there are a lot of operational challenges. How do you manage the external and the internal, not making them conflict? So, external reservation is already something that we see increasing in the market, and our assumption from the feedback that we hear is that it is going to increase.”

The result is that landlords need to integrate their legacy operating systems into more modern technology platforms that allow greater flexibility and customization for them and their space users, Kroll said. “I think everyone can relate to the fact that if it’s not going to be easy for the tenant to make reservations accessible and streamlined, they’re not going to do it, especially not on a daily basis.”

Lulafit’s Werner agreed about the hospitality technology challenges facing office landlords.

“From a technology perspective, that means a lot of different components have to interact with one another,” said Werner. “Now my technology needs to be able to know whether you’re a tenant in the building, or whether you’re in the neighborhood and coming in because you’ve rented an event space. And how might you access the building? Do you need to go through traditional security? How do I get to these spaces? Where is that space actually, physically located in the building?”

Phil Kanfer, CEO of Manhattan-based proptech advisory firm Market Lane Advisors, said in an email that there is a common amenity theme among the owners he works with: “Experience and simplicity. It’s all about making things as easy and as desirable as possible for employees to come to the office.

“There’s a tremendous focus on access, both for tenants and visitors, making the transition from street to suite as seamless as possible,” Kanfer added. “Companies like Swiftconnect have lots of owners intrigued by their ability to have tenants shed the HID card in favor of a mobile credential via Apple Wallet. The credential not only allows you access to the building and your physical space, but to any of your office locations throughout the country.”

An office building having a hospitality feel continues to remain a focus, he added. “Last week, a client remarked, ‘I want the tenant and visitor to feel noticed and happy, just like they would at a hotel.’ The emphasis on experience has only just begun.”

Of course, the seasonality of office building outdoor spaces in northern climes such as New York City impacts their use, said Jonathan Bennett, president of AmTrust Realty, a Manhattan-based owner and operator.

“They are less used than the indoor amenity spaces, but it’s a really case-by-case basis,” Bennett said. “One location that’s actually a private outdoor space built out for a tenant is very, very actively used, and maybe that’s because it’s so easy for them to access it. They have their own private outdoor space. It’s nothing crazy, but a well-programmed area outdoors with a beautiful glass enclosure around the side and a couple of different outdoor soft seating areas, as well as tables and chairs. The tenant is a creative company, so I think that also comes into play, versus other types of tenants. Maybe an accounting firm wouldn’t necessarily use it as often as the creative firms.”

Regardless, outdoor space rentals are of primary strategic importance for Bennett’s company, he added.

“Publicly accessible or building-accessible outdoor spaces are something that we think about as Plan A, not a Plan B,” Bennett said. “Meaning every time that we’re thinking about investing capital into doing something like that, it’s not just, ‘Hey, we can provide this to the building, but yeah, we could also rent it out if it is appropriate.’ We’re doing something in Chicago right now where we’re going to have an outdoor space overlooking the Chicago River that will be an adjunct to a brand-new amenity space we just opened up that’s highly designed. It looks like a luxury boutique hotel lobby and the outdoor space. 

“You could do weddings and other types of corporate events. I don’t look at that as a backup plan.”

David Abrams, co-founder and CEO of Hilo, a Toronto-based software as a service platform for building operators, sums up the changes in outdoor space use as part of an overall hospitality trend for office buildings.

“Office buildings are no longer in the space business alone,” said Abrams. “Those days are long gone. They are now attempting to create an environment, offer an experience that will differentiate. And I think this notion of hospitality can be a huge driver.”

Philip Russo can be reached at prusso@commercialobserver.com.