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Package deals: Offices adopt hotel mentality as extended stay becomes new normal for workers.

Hospitality has become a driving force in the office rental market.

Along with conference rooms and gyms, features that have long been associated hotels, workplaces are also adding lounges, cafes, concierge services, game rooms and sleeping areas.

Demand has even given life to a niche industry in which third-parties, such as Convene, manage outsourced amenities.

In short, offices now mirror hotels in the pursuit of making people feel at home away from home while doing work away from work.

This trend is a response, Convene president and cofounder Chris Kelly explained, to the years-long bleeding of work into personal life through mobile phones and remote Internet access.

"We're moving from worklife balance to work-life integration," Kelly said. "The workplace is just catching up to the fact that work has already infiltrated the home life."

Kelly and others who deal with commercial development and design see the addition of outdoor space, recreational areas or even places where coworkers can simply converse over coffee or food as not only a means for humanizing workers, but also bolstering recruitment and increasing productivity.

Some connect the rise of office amenities to the influx of millennials into the workforce, drawing parallels between the array of creature comforts and resources offered on today's college campus. Others view the trend as a vehicle for team building and retention. From a development perspective, they're becoming a requirement.

"If you want to be competitive, you need those added amenities," Randal Froebelius, a spokesman for the Building Owners and Managers Association, or BOMA said. "Tenants are expecting that kind of space now, either dedicated to themselves or as a common space that others can share with them.'

Finished rooftop terraces and shared meeting spaces have become so common, Froebelius explained, that BOMA recently updated its standards for measuring rentable square footage to allow landlords to include exclusive outdoor and balcony space, a first since the industry group began making guidelines more than a century ago.

Despite the ravenous demand for these features, Froebelius said they've basically been baked into the average asking rent in most major cities.

"If you're in a competitive market, it's not that you're going to get higher rents, but you will lease quicker and get a higher quality of tenant," he continued. "A project that doesn't offer [amenities] might have to offer a discount to market rate."

Global trends toward more amenable offices have also coincided with historic rent rates in New York's commercial market and steady decline in personal workspace.

In Manhattan, the average asking rent for office space was nearly $80 psf during the third quarter of 2017, according to a report from Avison Young, nearly $14 psf more than before the Great Recession and nearly $30 psf more than the 2010 average. Meanwhile, office space per employee has dropped nationally from 225 s/f in 2010 to 176 s/f in 2012 and now it's estimated to be closer to 150 s/f, according to real estate data collector CoreNet Global, for some New York offices, it's less than 100 s/f.

Dedicating space to dining, seating or any other non-work-related use takes away precious floor space, but certain amenities can be used to ease the pain of co-working, Nancy Ruddy, co-founder of CetraRuddy Architecture, said. Whether it's a dedicated room for meditation or a glass booth that employees can use to make personal phone calls, the key is to find ways to make people feel like privacy is still a possibility.

"It's this idea of being alone together," Ruddy said. "That's something that's been adopted from the hospitality world."

Still, space is money in New York City, whether it's in a neighborhood, in a certain building or on a specific floor. This is where Convene comes into play. Founded in 2009, the company brings a two-pronged attack by offering high-end meeting venues that cater to Fortune 1,000 companies and manages in-building amenities spaces. Backed by primarily by Brookfield and the Durst Organization, the company recently launched an effort to raise $150 million in venture capital.

Most of Convene's clients can afford their own amenity spaces, Kelly said, but they prefer the high level of quality and versatility Convene provides to the more generic experience of dealing with an in-house service or a hotel, which was their primary option. Also, for larger scale amenity spaces, companies can avoid locking into a lengthy lease by renting space in a building that contacts with Convene directly.

In addition to offering eight meeting venues in New York and several others throughout the country, Convene also runs a shared amenity space in One World Trade Center. The 64thfloor space includes a barista-staffed cafe, meeting space, a game lounge and a community manager tasked with orchestrating building-wide events.

"What you're seeing is there's an amenities arms race going on," Kelly said. "What's happening is the facilities are transitioning from being unstaffed, stale places to much more vibrant, hospitality-centered features, they're going from 'check-the-box' to really delivering an experience."

Ross Chomik, a managing partner at New Jersey-based Vision Real Estate Properties, said a vibrant workplace has become an essential tool for companies looking to compete for the best talent.

"Where is that talent? Millennials, followed closely by Gen Y, and they're coming from these universities where they're exposed to a lot of amenities that are easily accessible to them," Chomik said. "The way they earn is the way they learn."

Free of the constrictions of New York's cramped and pricey land market, Vision Real Estate has become something of a specialist in so-called experiential workplaces in the Garden State, including converting a 1.5 million s/f vacant lot in Whippany into a vibrant headquarters for Bayer Healthcare. Its latest endeavor is a 19,000 s/f office complex in Warren.

Financed through a joint venture with Rubenstein Partners, the Warren Corporate Center will have a green roof with seating and event space, an amphitheater, a full basketball court, a fitness center, multi-function conference rooms and high-end indoor and outdoor dining all at the standalone site.

Along with appealing to young employees, Chomik also sees the hospitality office model serving as a counter to the work-from-home movement by offering fun, engaging spaces for people to interact with one another.

"You can't replace that in the workforce, that human connection," he said, "and that's where the hospitality end of it comes into play, that's the convenience aspect, the ability to make the workplace more comfortable, more enjoyable to be, in. If you can do that, the whole mindset changes."

Elisabeth Post-Marner, a principal at the interior design firm Spacesmith, believes amenable offices benefit not only millennials but all workers by encouraging them to interact more with one another. One of her recent clients, Abrams Books, is a far cry from the youth-driven tech companies that often serve as caricatures of the modern office, but she said it has seen an uptick in collaboration and communication by rolling features like lounges, libraries and a barista station to its new headquarters in Lower Manhattan.

"It's not at all just about millennials. It's not just beings able to say 'hey, we've got a pool table and a barista in the afternoon, check us out,"' Post-Marner said. "It's about something much more important, it's about communication between people who work together."

She also sees a connection between university settings and workplaces, though one that runs deeper than coffee shops and game rooms. She sees a professor-student mode playing out in businesses that favor large, company-wide meetings, a trend that is also driving the demand for large conferencing spaces. However, Post-Marner said amenable workspaces don't need hefty investments in physical construction so much as a change in mentality and approach.

"You can stand up in the middle of the office and talk to your employees, that doesn't cost you anything," she said. "You shouldn't have to spend a lot of money to do this, it really is about attitudes and accessibility and it's much more complicated than saying I'm going to build a lounge and be more productive. The whole perspective on working relationships has to change.

Jacqueline Barr, a design principal for the architectures and design firm Ted Moudis Associates, said self-learning technology will become the next phase of must-have amenities. From scheduling software to programs that help with time management and efficiency, she predicts the demand will shift to features that make work as seamless as possible.

A 20-year veteran of the interior design industry, Barr attributes the rise of workplace amenities to previous technological advancements and the increased emphasis on maintaining a work-life balance.

"Where we are right now is 100 percent where we should be," she said. "It'll be interesting to see the next two or three things that will happen over the next 10 years or so and how we'll look back at this time and say 'I can't believe we weren't doing this sooner.'"

Caption: A game room at One World Commons.

Caption: CHRIS KELLY

Caption: NANCY RUDDY

Caption: RANDAL FROEBELIUS

Caption: Trendy new restaurant? No, its the cafe at MarketAxess' new Hudson Yards offices designed by Spacesmith

Caption: Warren Corporate Center will have a green roof with seating and event space, an amphitheater, a full basketball court, a fitness center, multi-function conference rooms and high-end indoor and outdoor dining all at the standalone site. Rendering by KA Architecture

Caption: Ted Moudis incorporated entertainment areas in the interior design of the new Compass real estate offices at 90 Fifth Avenue. The architectural firm's Jacqueline Barr believes all of this will be the norm in 20-or-so years.
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Comment:Package deals: Offices adopt hotel mentality as extended stay becomes new normal for workers.
Author:Campbell, Kyle
Publication:Real Estate Weekly
Geographic Code:1U2NY
Date:Nov 8, 2017
Words:1598
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