Tech tenants are having an undeniably huge impact on commercial real estate. Think about, for example, how large of a role Amazon is playing in the Seattle market. Right now, the e-commerce giant occupies around 13% of the city’s downtown Class A office space. While this is impressive in its own right, planned expansion puts the company on track to occupy 25% by 2017.
Amazon’s tremendous success and fast-paced growth is definitely not the norm, but it serves to highlight the fact that landlords can’t ignore the wants and needs of tech tenants – especially in popular urban areas like New York, San Francisco, and even Chattanooga, Austin and Washington DC – that are hotbeds for both established tech companies and innovative new startups.
Speaking about the New York CRE market, CEO and founder of advisory firm Truman James, Coleman Skeeter, expressed just how important it is to attract high-tech companies. “Technology tenants are arguably the biggest driving force in the current climate of record-high rents and record-low vacancies.”
We know that tech tenants are becoming ever more prevalent, but what exactly are they looking for in leased space?
- Shorter Lease Terms and Greater Flexibility
Small-to-mid-sized tech tenants have to be able to plan for rapid growth, especially during their first few years. They hope to outgrow their current space in short order, and leasing the amount of room they anticipate needing twenty-four or thirty-six months down the road isn’t always practical.
Attracting tech businesses means straying from traditional commercial leasing practices. Whereas in the past you might sign a five or ten-year lease with a company and have little further interaction until it was time to renew, landlords today need to be willing to develop an active relationship with their tenants, taking the time to understand their individual needs and working together to create a situation that benefits everyone.
- Great Lifestyle Locations
By-and-large, most tech tenants dip heavily into the Millennial workforce to find employees. And one of the most important factors to those young workers is location.
Buildings that are situated in communities and neighborhoods with a high quality-of-life are often the most attractive to tech companies and their employees, many of whom despise the suburban commute and instead prefer to live where they work. They’re searching for locations close to great restaurants, hip nightlife, cultural attractions, convenient public transportation, and reasonably-priced quality housing.
- Modern Features and Amenities
Historically, office buildings were pretty standard commodities. While there would obviously be variations from property to property, they typically didn’t differ much in appearance and functionality. Today, companies are looking for spaces that have unique personalities that match their corporate culture and the wants and expectations of their employees.
Just a few of the features and amenities popular among tech tenants include high ceilings, oversized windows, gyms, bicycle storage, concierge services, and spacious modern communal areas like WiFi-equipped rooftop lounges .
- Practical Floor Plans
Open floor plans have exploded in popularity in recent years, often because of the increased productivity associated with a collaborative work environment. But that doesn’t mean you should be gutting your available spaces to attract tenants.
Even though coworking and hot desking have replaced cubicles and individual offices in many companies, there’s still a demand for private meeting spaces and isolated work environments. And while smaller tech firms are leveraging the cloud for everything from data storage to SaaS, there’s often a need for secure, well-ventilated server rooms and hardware closets. The key for tech tenants is in striking the right balance between collaboration and practicality.
- Reliable High-Speed Connectivity
A reliable, high-speed internet connection is at the backbone of nearly every tech company. And a commercial property’s tech infrastructure can play a huge role in its tenants connectivity.
Not only are tech clients looking for properties with multiple points of entry for redundancy, but they also want to lease space that is appropriately wired with fiber for high-speed connections. As such, one of the best ways landlords can attract prospective cutting-edge tenants is with a Wired Certification which designates their buildings as tech-friendly spaces.
The commercial real estate market is steadily becoming more reliant on tech companies to fill vacant space. In 2014, the tech sector was responsible for 20% of all commercial leasing activity in the United States, and with the continued growth of giants like Amazon, as well as the influx of new tech firms and startups, that figure isn’t likely to decrease in the near future. For landlords and property managers striving to minimize vacancy and maximize revenue, ignoring the needs and wants of tech tenants could easily wind up being a very costly mistake.