In competitive office market, landlords try to hook tenants with amenities
By By Natalie Sherman and The Baltimore Sun
Feb 17, 2014 at 8:59 PM
Most of the upgrades at the two-building BECO Towers complex in Owings Mills are pretty standard: new windows, functioning elevators, an updated heating and cooling system.
Then there are the fish tanks.
The roughly 1,000-gallon aquariums, which BECO Management installed last month in the lobbies of both Mill Run Circle buildings, cost about $100,000 each. They required the commercial real estate firm to reinforce the floor and replace its cleaning supplies with fish-friendly materials. The company also is working to improve the quality of a dedicated "fish cam," which livestreams one tank's aquatic activity 24-7.
Different? Sure, but in a market where vacancy rates in office buildings remain stubbornly high, real estate agents say, the investment is worth it.
"Landlords typically don't just spend money for the sake of spending money. They're doing it for a reason," said Joe Nolan, a Towson-based principal of NAI KLNB, who specializes in office space. "It sounds like they're trying to distinguish themselves from other buildings and in a soft market it makes a lot of sense."
"Who knows?" he added. "Maybe somebody's really into fish."
In the Baltimore region, vacancy rates have remained stubbornly high since the recession hit, with end-of-year levels ranging from the relatively healthy 11 percent along the Interstate 83 corridor to 24 percent in Harford County, according to a report by MacKenzie Commercial Real Estate Services.
Those rates are driven in part by companies reducing their footprints, a trend driven by cost-consciousness and technology that most are predicting will continue. Between 2010 and 2012, the average office space per person fell from 225 square feet to 176, a number predicted to drop to 151 by 2017, according to CoreNet Global, an association for corporate real estate professionals.
But the space-cutting has come at a cost. The 2013 annual workplace survey of more than 2,000 people by design firm Gensler cited downward pressure on real estate as one of the factors "compromising the effectiveness of the U.S. workplace" and found that 69 percent of workers reported dissatisfaction with noise levels in their primary work space.
Jim Camp, managing director of Gensler's Baltimore office, said companies are responding by giving workers more options when deciding where to work, a shift also shaped by technology and a younger workforce.
"The biggest shift is this idea of giving people a choice," he said. "You need a place to collaborate without sacrificing the ability to focus."
That's the market some landlords, like BECO Management, are trying to capture.
The company has carved out space at BECO Towers for common areas, including a cafeteria, a workout center and a planned "living room," a communal lounge with couches and television where workers can go when they need a break.
The aquarium is a touch inspired in part by a University of Pennsylvania study, which found that watching fish can reduce stress. (Former New York Mayor Michael Bloomberg also favors fish; he installed two tanks in City Hall and reportedly paid $62,400 out of his own pocket for 12 years of weekly cleanings.)
"The thought is we commit ourselves to building decompression areas so people can get away while they're at work," said Roberta Levy Liss, Rockville-based BECO Management's executive vice president for leasing. "We build in areas where you can really get away and think … which our tenants say is a significant factor to employees."
At Executive Plaza, a four-building, 550,000-square-foot office complex in Hunt Valley, Hill Management Services has added a Wi-Fi lounge, workout room, and new tables and chairs to its lower level.
"It's somewhere else to go and take your lunch and collect your head," said Danielle Beyrodt, Hill Management's vice president of leasing and acquisition, who said the company used the space for storage until deciding that "home spaces" were more of a draw.
Beyrodt said the amenities have helped Executive Plaza's buildings — which opened in 1975 and are ranked as a lesser-quality "Class C" space — attract clients who might otherwise look at a newer property. The complex, which also hosts a post office, daycare and some shops on the lower level, is currently about 85 percent leased, she said.
"I've always been able to differentiate my building because of my amenity package," she said. "I think it's a draw."
When BECO Management bought the 330,000-square-foot Owings Mills complex in 2012, most tenants were on the verge of leaving, but the renovations persuaded them to stay, Liss said. Now, one tower is almost fully leased. The other still has occupancy below 48 percent, she said.