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Marketing and managing older office space.

Suburban office buildings are a lot like clothing styles. Designs, materials, and color schemes quickly become outdated as one new trend replaces another.

In the clothing industry, responding to changes in the marketplace may be as simple as switching a tie or lowering a hem. In commercial building management, such aesthetic adjustments are not as easy-and are far more costly.

A suburban office building built 10 or 15 years ago will look obsolete when compared to a brand-new building that offers tenants the latest in architectural design and technology. Furthermore, with the rapid push of commercial development toward more desirable outlying areas, an older office building may lose the location advantage it enjoyed during its prime years.

It is possible, however, to ensure the continued marketability of a property and to maintain a high occupancy rate by formulating an ongoing, long-term redevelopment plan for the building. Through planned redevelopment, an owner can offer a tenant value, or at least the perception of value, by never allowing the building to get tired and old. Without such a plan, the value of the real estate will continue to diminish until it is virtually worthless and its client base has eroded.

The ideal time to think a redevelopment plan is when a building is new, not when it is already run-down. That is not to say that a redevelopment plan cannot be used effectively to breathe new life into a deteriorated building. It is simply that prevention is always the best medicine.

A long-range commitment A comprehensive master plan for redevelopment will accomplish two things. First, it will allow the renovation to be done in stages, while ensuring that the interior and exterior remain well-blended and unified in design. Second, it will enable the property manager to set up a financing plan that will provide the funds for each stage of renovation as it is needed.

Ideally, an owner needs to maintain a sinking fund that will enable him or her to refurbish the building's common areas every five years and replace the parking lot and roof roughly every 15 years. Building safety code changes should be implemented as they are upgraded to avoid "sticker shock" when the inspector shows up. If, for example, the repairs and remodeling will cost $150,000, the equivalent of $30,000 a year, an owner can determine how much to set aside from the cash flow each month by dividing the annual amount by 12.

The first renovation step

Before sitting down with a designer, contractor, and accountant, an owner should become familiar with the popular design features being offered in new office buildings in the market. Some of these features should probably be incorporated into the renovation.

Unlike downtown office buildings, which often have classic marble or granite walls and floors, suburban office buildings tend to use more synthetic materials which are "trendy" and quickly outdated or worn out. This rapid obsolescence-both of aesthetics and materials-can contribute to an overall dated and shabby appearance if ignored.

Areas of high impact

To create the most favorable immediate impression, refurbishing should focus on the areas that will have the greatest positive impact on prospective clients. In order of importance, these areas include:

* Landscaping. Years ago, a lawn and a few trees were sufficient. Now the trend is toward mega-landscaping with boulders, fountains, ponds, and elaborate flower beds.

* Exterior facade. Weather-beaten tile, brick, and concrete should be cleaned, repaired, or replaced. New windows and doors can be installed to modernize the building. Trimwork should be painted; old glass should be replaced; and sidewalks should be repaired.

* Lobby. The client's impression of the lobby will influence the overall feeling for the building. Big, airy lobbies and glass atriums are currently in fashion. In an older building, it may be possible to recreate that same spacious impression by knocking out a few walls and combining some first floor space with the existing lobby. The old carpeting should be replaced, and walls and wood paneling should either be painted or restored.

* Elevator lobby and elevator cabs. These should convey a clean, modern appearance. Modern safety features should be added as they become common in newer buildings.

* Hallways and suite entrances. The color schemes, designs, and materials should be changed periodically to keep up with current trends. Suite entrances should be distinctive. Solid-core, full height doors that reach to the ceiling are now in demand. A similar impression can be created by using conventional 81/2-foot doors and putting transoms above them.

* Restrooms. Restrooms should be well-maintained and give a clean, modern appearance. They are important areas which should not be ignored.

Areas of long-term value While it is important to refurbish the visible portions of an older building, no owner can neglect the hidden parts. Mechanical systems such as air conditioning, heating, air exchange, lighting, and electrical require yearly maintenance to avoid costly breakdowns. The most common complaint about office buildings by tenants is invariably the quality of the HVAC systems. A good environment means a happy tenant.

In many areas, changing fire, safety, and handicapped-access codes may also require modifications in the building's structure, floor plans, and exits, If the building has asbestos insulation, careful consideration should be given to the question of removing it. Often, asbestos removal is not financially feasible. However, if a building is well maintained, asbestos should not be a hazard.

Security is an important concern to tenants, especially in mature neighborhoods, so a property owner may need to install alarms, put a fence around the parking lot, and hire neat-appearing safety officers to patrol inside and outside.

Marketing the "new" building

Once the physical appearance of a building has been updated, the next challenge is to attract new tenants. In many ways, renting office space in older buildings is like selling used cars. A salesperson needs a good advertising campaign to get customers in the showroom. Once inside, it is easier to persuade them that the product and price compare favorably with the competition.

In marketing older office buildings, the key to success is creating a perception of value. Specifically, one must convince prospective tenants that they are getting "just like new" office space for a much lower price. To be competitive, it is important to know what the competition is doing and how much they are charging for space.

Owners of older office buildings can offer rental rates that are substantially below those of newer suburban buildings because the original construction costs were lower and the taxes and carrying costs are less. The significant bottom-line savings may be enough to encourage prospective tenants to overlook the disadvantages of occupying an aging building in a less favorable location.

Providing extra, personalized services is another way to retain existing tenants and attract new ones. Extra touches such as distributing newsletters, giving holiday gifts, and putting up decorations are effective in establishing a good rapport.

By helping tenants build an attachment to the building-not just to the physical structure, but also to the management-an owner can prevent rapid turnover. This will minimize the loss of rental income due to vacancies and save the cost of retrofitting the vacated space.

In the long run, the successful ownership of an office building requires deep pockets. It also requires a master plan for management that sets aside adequate funds for constant maintenance and periodic renovation.
COPYRIGHT 1990 National Association of Realtors
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Hayman, Alan
Publication:Journal of Property Management
Date:Sep 1, 1990
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