Startups are helping to drive up office rents and slash vacancy rates in major markets all around the country, but are commercial real estate brokers giving them the attention that they deserve? Research marketing firm RE:Tech isn’t so sure. In a recent article, they posed the question: are commercial real estate brokers neglecting startups?
Is RE:Tech correct that real estate professionals are missing out on huge opportunities in the current startup-fueled market? Perhaps so, but it may be because brokers are still learning what these new companies want from office space and the best ways to connect with them.
What Startups Want in Office Space
It’s no secret that entrepreneurs are flocking to urban centers like New York, Chicago, and San Francisco and leaving suburban and secondary neighborhoods behind. But while you can’t move a building’s location, there are plenty of other ways to make office space appeal to small and medium companies.
Appropriate Office Sizes – If you’re holding out for a single 100,000-square-foot tenant, you’re probably passing up a plethora of eager, premium-paying startups in the meantime. Startups are demanding smaller, more flexible and collaborative offices and more efficient space utilization. Size does matter - and in this case, startups tend to prefer smaller, more economic space design - squeezing more employees per 1,000 square feet than in years past.
Short Lease Terms –Because of the uncertainties surrounding new companies – especially in the tech sector – startups today are less willing to commit to long-term leases than in the past. RE:Tech reported that 60% of survey respondents prefer lease terms between 3 and 5 years, while the other 40% would be hesitant to commit to a space for more than 24 months.
Reliable Connectivity – If you’re serious about tapping into the startup market, you need to have the infrastructure to support them. This can mean include having multiple service providers, a dedicated telecommunications room, and building-wide fiber optic cabling. All of this may sound expensive, but it doesn’t have to be: Jack Resnick & Sons recently improved the tech infrastructure in their buildings without spending any money at all.
Best Practices for Connecting With Startups
Knowing what modern startups are looking for in an office is only half the battle. The other half is being able to effectively reach out to the decision makers and get them interested in your space. But with 33% of new companies having never been contacted by a CRE broker, it may be easier than you think.
Put Down the Phone and Pick Up Your Tablet – According to Tech.Co, the average tech entrepreneur is 31 years old, with 75% of startup founders in their mid-thirties or younger. These Millennial decision makers aren’t as receptive to phone calls as their older counterparts, so if you want to connect with them, go with modern mediums like social media and text messaging - or good old fashioned emailing.
Get Straight to the Point – Active office listings are getting easier to find because of companies like SquareFoot and PivotDesk. As a result, startup decision makers don’t want you to show them the same information they could find on their own – they just want you to make the leasing process as simple and painless as possible.
Effectively Highlight Your Strengths –Having reliable high-speed internet access sounds great, but can you explain the difference between your building’s fiber-optic connection and the property next door? If your building has a Wired Certification, prospective tenants will already know that it’s at the front of the pack.
At the end of the day, most startups are looking for a flexible lease in a location that meets the tech-heavy needs of their growing businesses, as well as proactive, straight-forward professionals who can help them get into that perfect space with few hiccups.
Have you been neglecting startups up until now? If so, it’s not too late to change gears and shift your focus towards the swarm of young companies that seem to be constantly pushing the commercial real estate industry to new peaks.