The same thing can be said for One Victory Park and International Plaza in the Dallas area. Tricked out amenity floors using underutilized space are serving six increasingly important purposes:
- Bringing employees back into the office
- Promoting more engagement and interaction
- Providing tenants with state-of-the-art lounge and conferencing areas with food and beverage services so they don’t have to build out their own
- Repurposing underutilized space within the building
- Serving as a powerful marketing tool
- Garnering higher per square foot asking prices for owners
Paying close attention to which amenities are driving leasing activity, these properties are delivering entire amenity floors that house conference centers, wine bars, fitness centers, coffee bars, food halls, game rooms, mothers’ rooms and much more. With hybrid workplaces the growing norm, not only do these amenity floors provide many of the comforts of home in a work environment, but they also provide the social interaction and experiences tenants crave—with 52% of employees in 2022 saying they want to go to the office to socialize compared to 39% in 2020 according to Cushman & Wakefield Total Workplace Experience per Square FootTM (XSF) data.
Brett Williams, Senior Managing Director and head of Presence, Cushman & Wakefield’s tenant experience offering, can attest to this. “Amenity floors create a sense of community and place for a property building,” said Williams. “Having one place to go for this type of social interaction creates opportunities for engagement and impromptu interactions you can’t get while working remotely.”
Although amenity floors require significant capital investment, many of these older properties can’t afford not to make these updates because of the risk of becoming obsolete. “It’s so hard to quantify results when it comes to improving the tenant experience as it’s so subjective,” added Williams. “But what I can quantify is if you’re not doing it and your competition is, you’re at a disadvantage. Plus, being able to ultimately charge more per square feet helps offset the costs of the upgrades.”
A recent Cushman & Wakefield analysis of the largest 2022 office leases indicates that occupiers are disproportionately attracted to highly amenitized buildings. On average, the buildings where the largest leases are being signed have 14 different amenities available, and those that have been built or renovated in the past three years feature even more (17 different amenities). In particular, tenant lounges and amenity floors have grown more common as owners and occupiers have been looking for ways to create social spaces for employees and ways for tenants to comingle. Over half of highly amenitized buildings with recent significant leases had tenant lounges or amenity floors, but of those built or renovated since 2020, three-fourths have included a space with amenities. This focus on experience is paying off; absorption in buildings with tenant lounges has been positive, with occupancy increasing by 11.3% since 2020. The average asking rents are also 33% higher than the surrounding submarkets.
With the right vision, strategy and execution, the “older” properties within this article have positioned themselves as state-of-the-art Class A buildings, providing activated amenities and unique tenant experiences that will ideally motivate employees to get back into the office while keeping buildings leased and relevant. These are all clear case studies of the broader flight-to-quality trend that is driving landlord investment and attracting the largest tenants.
“Taconic’s investment of significant capital, time and effort has not only resulted in increased occupancy, but also led to an impressive surge in rental rates, soaring beyond 48% growth—a testament to the undeniable appeal and allure of our revitalized spaces.” – Carrie Halbrooks Senior Associate, Cushman & Wakefield