Office Amenities Influence Talent Wars in Texas

Office buildings that have been newly constructed or recently rehabilitated are fielding the greatest demand from large companies, which are banking on the idea that lifestyle-enriching amenities and a vibrant surrounding neighborhood create advantages in attracting and retaining talent.

According to the Bureau of Labor Statistics, during the 12-month period ending in July, the four major office markets of Texas added more than 200,000 new jobs combined. The state’s unemployment rate was 3.4 percent at the time of this writing, 30 basis points below the national average.

The job market clearly favors applicants, and the competition between major office-using companies to secure the best applicants is fierce. Of course, some job seekers still base their employment decisions based on traditional factors like salary and commute time. But all other factors being held equal, employees with multiple job offers are placing greater emphasis on what kind of working environment they can get with one employer versus another.

“It’s all about what amenities a building can offer to its tenants,” says Jackie Marshall, first vice president in CBRE’s Dallas office. “Many tenants are willing to pay more to be in buildings that help them recruit and retain talent, and amenities that make their employees happy is a big part of that.”

Scott Martin, executive managing director for Granite Properties, notes that for many large office users, investing in their real estate is a form of investing in their employees.

“In today’s market, you have to dedicate more of your rental space to amenities,” he says. “A company’s real estate costs are usually between 5 to 10 percent of its total overhead, but the majority of overhead is labor. If it makes people happy, why not provide an environment that enriches their experiences and helps them thrive?”

The quality amenities and workspaces that young professionals demand have played a big role in the rise of coworking office space. Coworking space has proliferated in Dallas with concepts like WeWork and Common Desk both growing their footprints. New coworking firms like CBRE’s Hana are also getting into the mix.

In Houston, Granite recently redeveloped a three-building, 825,000-square-foot Eldridge office project in an effort to revitalize a piece of the city’s vintage office product, much of which was built in the 1980s. Granite renovated the lobbies, elevator cabs and corridors. Also under construction is an amenity floor in the middle building featuring a fitness center with state-of-the-art equipment and locker rooms, as well as a café, conference room and smaller meeting spaces.

What’s Changed?

To land the companies with the biggest office footprints, owners and developers must recognize that employees’ approach to modern work environments has changed.

According to some industry professionals, the growing emphasis on quality amenities stems from the fact that people want to incorporate other parts of their lifestyle into their work routines. In addition, many companies are embracing the notion that happier employees are more productive employees, and these firms are taking the task of providing that enrichment into their own hands.

“You have to tend to the entirety of people’s lifestyles and recognize that they no longer go to work just to go to work,” says Eric Siegrist, director of leasing at Parkway Property Investments, a real estate investment firm. “We’ve bought into the theory that people are more productive when they feel complete. So we strive to curate experiences and conveniences that are additive to their daily lives.”

“Human resources departments are getting more involved in the selection of their companies’ office spaces because they see real estate as a tool for bringing in the best talent and keeping it,” adds Will Hendrickson, managing director at the Dallas office of Granite Properties. “Providing a modern space that people actually want to work in makes it easier to attract the best talent to your company.”

Granite Properties has developed new buildings and undertaken repositioning projects in both Dallas and Houston to meet the growing demand for quality space and preferred amenities.

The company is developing Granite Park Six, a 415,000-square-foot building in Plano that will feature a market café, customer lounge with coffee service, a bar, three conference centers and a fifth-floor amenity deck. In addition, Granite recently completed Factory Six03, a redevelopment of a vacant warehouse building in Dallas’ West End area that added 215,000 square feet of quality space to the local supply.

Of course, many of those amenities have been done before, but the company also plans to include a golf simulator at its Plano project. Hendrickson notes that this particular amenity was introduced at one of the firm’s buildings in Preston Center, The Douglas, and was well-received by tenants.

“We took space that had previously been a bank vault and converted it into a corporate lounge and training room where people can come eat, relax and have fun by using a professional golf simulator,” he says. “Spaces like that promote a strong sense of community within the building.”

Going All Out

Including some combination of a particular set of features in addition to the office suite itself — fitness centers, food courts or cafeterias, conference rooms, tenant lounges — has become standard practice in the development or renovation of Class A buildings. But there are degrees of quality and affluence, even within the Class A space, and companies are beginning to recognize these discrepancies.

“There’s no silver bullet out there, but whatever offerings you have, they need to be best in class,” says Siegrist. “You can’t simply check the box on meeting basic needs like cafés and fitness centers anymore — to achieve the highest impact, you have to have the best concepts.”

Parkway operates Greenway Plaza, one of Houston’s largest employment hubs, and has introduced a multitude of new enhancements to transform the property from simply a collection of workspaces into a place of social gathering — even for those who don’t work onsite.

“When Parkway acquired Greenway Plaza, the food was adequate,” says Siegrist. “Now it’s been curated to give it authenticity and to raise the level of quality. With concepts like Feges BBQ and Greenway Coffee, which imports beans directly from Ethiopia, we’ve got a space that’s hip and cool. New companies come to town and see how people are willing to use their lunch hours to wait in line, and it endorses those products and services.”

The Hub, a marketplace at Greenway Plaza in Houston, has become more than just a place for employees to eat — it’s a gathering point for different members of the community due to its top-notch food and drink offerings.

Siegrist, whose company also recently introduced a childcare center at Greenway that is operated by Primrose, a well-known industry name, acknowledges that not every office owner has the capital to fund major building improvements and introduce new concepts. He also concedes that there remains a strong contingent of companies that are willing to settle for older office product without the enhancements in order to save on rent. But to be competitive in the Class A space, office owners and developers must use whatever resources they have at their disposal to create exceptional ecosystems.

At One Eleven Congress, an office building in downtown Austin, Atlanta-based Cousins Properties recently introduced Fareground, a marketplace that offers food from a variety of local vendors. The space also includes an open courtyard with green spaces and has quickly become one of the neighborhood’s go-to areas for socializing.

Other Building Features

Today’s tenants are attuned to more than just amenities within their office spaces. Features like LED light bulbs and insulated glass windows, resonate with companies that are environmentally conscientious.

Fast and seamless connectivity is also an increasingly important requirement among large office users in major cities. And of course, the vibrancy of the surrounding neighborhood has become make-or-break factor for employees facing multiple offers for similar salaries.

“Retail and walkable amenities continue to be critical to recruiting employees and keeping them,” says Chris Sido, senior vice president at CBRE’s Dallas office. “Aesthetics are also still big in the office market in terms of attracting users, many of which are more attuned to eco-friendly features that promote building efficiency and generate savings.”

Sido also says that with older buildings, tenants are still cognizant of the importance of functional floor plates and designable suites. Older properties that have these features and which are located in high-demand areas are prime candidates for repositioning and renovation projects that can ultimately lead to higher rents.

Taken collectively, these focal points suggest that the priority list for office developers and owners has changed drastically during the last decade. Tenants have spoken, and they’re looking to leverage all the features of their office spaces to gain an advantage in the war for talent.

“Office space is now being used as a tool for attracting and retaining talent across the board,” says Hendrickson of Granite Properties. “We’ve seen projects where owners have spent the dollars on updated lobbies and communal areas where tenants can congregate outside of their workspace — those are the projects that are getting the most attention in the market right now.”

— By Taylor Williams. This article first appeared in the October 2019 issue of Texas Real Estate Business magazine. 

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