CREJ - Office Properties Quarterly - October 2015
Not only does preleasing a building prior to completion lead to pleased investors and lenders, but also it is indicative of the level of success the development will realize. In today’s market, office real estate is highly competitive. As the economy continues to rebound, developers regularly are delivering new office facilities, and there is no shortage of supply. It is important that developers discover in the early stages of a project whether it will succeed, and preleasing tenants is the most effective indicator. How do developers deliver an office building that achieves preleasing success? First, developers must produce a clear vision for the project, including what kind of office tenants to attract and what features will best suit those needs. Highly efficient floor plates should be incorporated into the design to provide flexibility with the number of tenants and space needs per tenant that the building can accommodate. Employers today often look for office features that allow them to perform their work efficiently while recruiting and retaining top talent. It is important that technology needs are considered, as well as features that attract today’s workforce. Developers should pay attention to the latest office trends in order to deliver space that will entice future tenants. For example, options that allow employees flexibility with their commutes are a big draw for Denver’s workforce. Developers should consider the building’s proximity to mass transit, the cost of and amount of parking that will be available nearby, and the inclusion of bike racks. Also there are a number of energy-efficient features that will lead to low operating expenditures, which is a huge draw for office tenants because it will help keep rent rates down. Energy consumption is one of the largest drivers of operating expenses, so delivering an office facility that meets LEED standards, has an efficient building envelope design and uses upgraded energy components will ensure that the office operates efficiently for tenants. Once the building’s concept has been determined, the right team must be in place and have a clear vision of the desired end product. A strong brokerage partnership that understands the market and can target the right audiences is crucial. Brokerage teams will help find tenants who fit well into the ultimate vision and culture of the office building. In today’s development environment, buildings are intentionally designed to attract a specific segment of office tenants, accommodating the culture and needs of those office users. Once the right customers are targeted and engaged, brokers play the crucial role of interacting with prospective tenants to secure their interest in the building and, ultimately, their decision to prelease. Preleasing is ideal for employers who are committed to finding a long-term office space, and brokers help inform office tenants of the preleasing benefits. Office tenants who engage in the early stages of a development typically have more flexibility regarding their designated space within the building and the features included. Developers can better deliver office space that meets employer needs and can provide perks such as expansion rights and building-signage rights. In the end, the building functions better for the individual tenants at hand.
Still, the work is not over once tenants have committed; it is the developer’s responsibility to deliver a viable office building that meets its customers’ expectations. Collaboration is the key to a successful relationship. By discussing the logistics of space, amenities and finances with future tenants, office developers can ensure upfront that the tenants will be a good fit for the space and vice versa. By keeping tenants informed throughout the design and construction process, the developer can increase the likelihood of delivering an office building with which the customers are happy. Some tenants will want to be more involved in decisions than others, but no tenant should be surprised by any aspect of the office environment once it comes time for move in. A prelease office property inspection allows customers to see the space between the time of signing the prelease and the building’s completion. During this interim period, misunderstandings often can arise if the future tenants are not made aware of the changes taking place or provided the opportunity to refresh their expectations by seeing updates as the building begins to take shape. Taking the time to tour the property with the tenants refreshes their memories as to what to expect and reignites their excitement for the final product. While preleasing is crucial to a building’s success in the early stages, retaining tenants is important for the longevity of the development. It is, therefore, important to consider an office building’s customers during every stage of development and engage regularly. By doing so, developers can take pride in delivering successful office buildings within a competitive market.