By Al Barbarino
The Garden State’s office tenants want more than just a side of fries with their office space.
Tenants ranked food service the number one “must have” amenity in an anonymous survey conducted by CBRE last month, followed by a long list of swanky services.
“The sort of mindset today is we’re all spending a lot of time, and more time probably than many of us would like to, at work and in our offices,” said Greg Barkan, a senior vice president with CBRE. “So recruiting and retention of talent is paramount for most corporations. Because of that, quality of life features are becoming much more important.”
Several hundred CBRE clients — ranging from fortune 100’s to small and mid-sized companies — participated in the survey. Many of the companies have national and international presences in addition to their New Jersey locations. Food service took 22.4 percent of the vote, followed by access to public transit, with 16.4 percent; access to downtown, with 11.9 percent; fitness center, with 10.4 percent; conference center and Wi-Fi access, each with 9 percent; IT support, with 7.5 percent; covered parking and bank/ATM, each with 6 percent; and LEED certification, with 1.5 percent.
Tenants’ love of grub came as no surprise, as food service facilities offer a win-win situation for managers and their employees, industry professionals said.
“Managers want to have the people on site and it makes it easier for them to not have to worry about people disappearing for long periods of time for lunch,” said Ed Duenas, a senior director with Cushman and Wakefield.
“The employees love it so that if it’s raining or snowing out they can just go downstairs and grab something to eat as opposed to having to go fight the elements in order to get food service.”
But food service is just one piece of the pie, served up alongside a long list of amenities that are more often than ever being bundled together and highly marketed in New Jersey. The souped-up packages are a result of a soft market and high demand for newer, more efficient buildings that are more likely to accommodate such packages.
“If you have it, you make sure it’s on every bit of information that you circulate regarding the property, whether it’s a brochure, whether it’s a flyer or an email,” Duenas said. “And every time a tenant visits a building it’s one of the first two or three things that you show them in the building. The lobby is first and usually the food service is second. Then you have all of your other amenities.”
The average commercial real estate vacancy rate in New Jersey was 19 percent in the third quarter, according to data from Cushman and Wakefield. Manhattan’s average vacancy rate was 9.3 percent. The difference gives New Jersey’s tenants more choices — and more leverage.
“Tenants across the board are now more demanding of landlords,” Duenas said. “As a result, the need for amenities is a differentiator in that buildings without them don’t even get considered.”
Buildings built in the 1980’s or earlier are much more difficult to re-rent as they become obsolete and are unable to meet the demands of Jersey’s amenity-hungry tenants, said David Simson, COO and vice chairman with Newmark Knight Frank.
He rattled off 15 major deals from the past two years — Panasonic, LG, Realogy Corporation, Blackrock and Pearson among them — that included high tech, bundled amenity packages with health clubs, cafeterias and conference centers. Every one of those deals involved new buildings over 100,000 square feet, packaged with healthy amenity packages.
“There has been a flight to quality in office buildings throughout 2010 and 2011 so vacancy rates are much disproportionately higher on the 30-year-old buildings than they are on the new buildings,” Simson said.
It’s a step tenants and management must take to differentiate themselves from competitors looking to reel in top talent. But attracting talent is one thing; retaining it is another. So whereas company CFO’s once made amenity decisions exclusively, today’s decisions are made jointly with human resources, Barkan said.
“You’re seeing the human resource side of the equation have a lot more influence and because of that these corporations are focusing much more on the quality of life that they’re giving to their potential employees and existing employees,” he said.
Though access to public transportation was first runner up in the survey, some industry professionals said it’s usually less important than conference and fitness/health centers.
“I see tenants every single day come into properties and what they’re asking for — does the building have a food service, does it have a fitness center, does it have a conference center?” Duenas said.
“We see the fitness center as number two and conference center as number three unless for some reason a tenant needs access to Manhattan for public transportation.”
Many people view public transportation as a convenience, not a requirement, Simson said. But in many cases it is crucial. It depends on the type of organization, where their clients are and whether they have offices in other regions. In Realogy’s case, for example, access to public transportation was very important.
“They picked Madison, New Jersey because it does have both good public transportation and good train accessibility,” Simson said. “They can pop on the train, do work on the train and end up in Manhattan in a relatively short time frame with no traffic, no parking hassles and the ability to interact with their New York office.”
Their new 270,000 s/f US headquarters is currently under construction in Madison New Jersey and will also include a full amenity package with state of the art eating facilities, gymnasium, fitness center and conference center — a package not unlike those being seen across the market.
“I just can’t emphasize enough the flight to quality that all of these tenants and executive management are trying to provide to their employees to differentiate them from their competitors,” Simson said.