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Experts: Upgrades Help Vintage Offices Generate Demand

This is the second in a series of stories about the office sector that go beyond the negative headlines. The first article, “CRE Experts Say ‘Not So Fast’ to Doom-and-Gloom Office Headlines,” is live. Future articles will focus on debt maturities and industry opportunities.

Tony Russo

A previous Connect CRE article explained that the “office sector is doomed” headlines are off the mark. For one thing, “office” encompasses everything from the brand-spanking-new Class AAA trophy assets to the older but still functional suburban Class C offerings.

Furthermore, landlords and ownership groups in charge of older office assets aren’t just sitting around and worrying about the tenants (or lack thereof). Experts tell Connect CRE that successful owners are beefing up their office commercial real estate to generate tenants – and leases.

Scott Morse

“We are seeing ownership that has invested multimillion dollars in infrastructure and amenities to reposition their assets,” said Scott Morse with Citadel Partners. “The ones that have done it well in a thoughtful way are seeing the returns on their investments.”

So What’s Being Done?

The main upgrades are the extras, including fitness, on-site food-and-beverage services and improving technology infrastructure. The experts also explain that building coworking and meeting spaces, upgrading lobby space and offering hospitality-related services (like concierge assistance) have helped boost tenant appeal. Outdoor spaces also have their place in office upgrades.

Aarica Mims

One example is the 1980s three-building Lincoln Centre in Dallas, which underwent a multimillion-dollar upgrade in 2022. The owners added an on-site coffee shop, park, wine market and food hall and updated the fitness center. The lobby areas were also updated. “All of this resulted in great leasing activity,” said KDC’s Aarica Mims.

Another example is the older O’Hare Offices, a five-story, 171,000-square-foot office complex in Chicago’s O’Hare submarket. The property underwent a complete lobby renovation in early 2023, and a “mom-and-pop” café was added. “O’Hare Offices has signed four new leases at the property this year alone,” commented Tony Russo with Lee & Associates. “It’s the positive word-of-mouth in the brokerage community about the building and its ownership that is helping to get prospective tenants in the door.”

David Martin

David Martin with Terra added that renovations and amenities on health and wellness can add to a building’s appeal. “Healthy employees are more productive and happier overall, and this, in turn, supports a company’s retention and acquisition of top talent,” he explained.

Then, there are the administrative perks that could also help lure tenants. CREXI’s Eli Randel pointed out that landlords could offer flexible lease terms while “incorporating advanced technology into office spaces to improve efficiency and productivity.”

Meanwhile, MDL Group’s Hayim Mizrachi indicated that tenant improvement contributions could be a powerful lure “if it’s new product and spec suites for an existing product.”

But Does it Work?

Eli Randel

Certainly, amenity upgrades and lobby refurbishments can improve a building’s appeal to tenants. But putting the effort and capital into an older office asset improves the optics. “They’re showing the market that they are not only surviving but have cash to put into their buildings,” Russo explained. “This puts them at an advantage when competing for prospective tenants.”

Most experts said owners who spend time upgrading vintage office buildings have reaped the rewards through improved leasing activities. As mentioned above, O’Hare Offices is receiving more interest and is generating deals. And Lincoln Centre in Dallas also signed multiple new leases following the upgrades.

Hayim Mizrachi

The experts also acknowledged that office buildings and their functions aren’t “failing.” Instead, landlords and ownership groups are changing to meet the hybrid model, which isn’t going anywhere. Still, “while we may continue to see a hybrid work model incorporated into employees’ office schedules, we don’t see office buildings going anywhere anytime soon,” Randel said.


Inside The Story

Terra Group's David MartinKDC's Aarica MimsMDL Group’s Hayim MizrachiCitadel Partners' Scott MorseCREXI's Eli RandelLee & Associates' Tony Russo

About Amy Wolff Sorter

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