Combination of Multifamily, Office Space is Hot Concept in Texas, Say InterFace Panelists
DALLAS — Say the words “mixed-use” in commercial real estate circles today and generally the first thought that comes to mind is a property featuring a combination of multifamily and retail space.
But there’s no written rule that says what property classes can or can’t be included in mixed-use. As such, a number of multifamily developers in Texas are redefining the term’s scope and application by bringing together apartment living and an office component in newer projects.
As part of the InterFace Multifamily Texas conference, a panel of real estate experts convened Sept. 13 at the Westin Galleria in Dallas to address this topic and other emerging trends in the apartment sector, most of which center on ways of improving amenity packages for tenants. Approximately 200 real estate professionals attended the event.
The move toward developing apartment communities with office space — not business centers — stems from landlords’ need to differentiate their amenity packages from the competition. These new office elements within multifamily properties are taking a variety of forms in their infancy, ranging from large co-working spaces and conference rooms to individualized desks and cubicles.
“Having amenities like a knockout pool and an awesome fitness center doesn’t really set you apart anymore,” said panelist Greg Coutant, director of development at StreetLights Residential. We’re working to provide what we call ‘makers’ spaces,’ which are open spaces with desks where tenants can work. We’ve found that if you provide a cool working atmosphere with connectivity, people will work there.”
Coutant noted that residents are drawn to the live/work/play environment that these office spaces provide, all under the same roof. His firm, which undertakes projects in metros with thriving office sectors, including Dallas and Austin, is even considering putting bars in some of these spaces to further heighten their appeal.
Panelist Rick Cavenaugh, president of Illinois-based multifamily developer Stoneleigh Cos. said that his firm has also seen tremendous success from the inclusion of office components at its properties, specifically co-working areas that allow employees from different companies to occupy the same workspace and develop synergies with one another.
“Integrating co-working facilities into the living environment and making it part of the offering to tenants is different from what we’ve seen with the likes of WeWork,” said Cavenaugh. “We did this with a property in Chicago and it was a total hit. We have since leased 140 workspaces in five months, and it’s brought a ton of vibrancy, traffic and new tenancy to the building.”
Cavenaugh stated that his firm sees the trend as particularly appealing to consumers in submarkets with steep office rents, such as Frisco and Plano.
“In those submarkets, there’s just not that option for people to have an office for a few hours a day, three days a week, and then to be able to walk down the hall to their apartment,” he said. “It’s a different working environment, but one that definitely promotes flexibility. We’ve seen that Millennials like that flexibility.”
Panel moderator Drew Kile, director of Institutional Property Advisors, a multifamily brokerage division of Marcus & Millichap, noted that the trend also seems to have legs in Austin, where office rents have been rising for the past five-plus years.
“There’s a growing percentage of people in urban Austin who work from home,” said Kile. “The more workspaces you put into a building, the more they get used. Not so much a business center, but a place where they can bring their own laptops and have their own meetings.”
Tom Lamberth, regional partner of Dallas-based CF Real Estate Services and another conference panelist, sees as much monetary potential in these features as the other panelists see in their ability to generate positive word-of-mouth for the property.
“We’re working on making the office component more than just an amenity, but something you can monetize,” said Lamberth. “We have a property in Atlanta where inside the amenities center we built about 12 office cubicles that people can rent for a few hundred dollars a month. And we’ve had demand for these spaces from people who don’t even live in the building.”
While StreetLights, Stoneleigh and CF Real Estate have yet to iron out all the kinks of developing and leasing these office spaces in their multifamily projects, they have little doubt as to their ability to heighten the appeal of the property and cater to the preferences of tenants.
— Taylor Williams