Open Office Is A Benefit to Landlords

By Kelsi Maree Borland 

Open office space—whether you call it create office or progressive office—is the most sought-after office configuration these days. While there are many benefits for tenants, like talent recruitment, talent retention and a smaller office footprint, there are also benefits for landlords. Open office leases faster and at higher rates, and it is easier to release with fewer tenant improvement costs.

“It is not expensive to have a few private offices and the rest open. When you don’t have a lot of money in the TI, it is easy to release the space if they don’t renew,” John Combs, a principal at RiverRock Real Estate Group, tells GlobeSt.com. “With traditional private offices, it is really difficult to keep it the way it is and find tenants for it. A tenant that wants an open space works with a designer to create the space that they want.”

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Open office spaces have myriad configurations, from simply having no private offices to some private offices as well as truly open spaces with exposed ceilings. The latter is the most expensive option. “Open space is really a cultural discussion. About half of tenants want the open concept and of that half about a quarter of them want to open the ceiling to make it look like more hip, cool space,” says Combs. “The open ceiling concept is where it gets expensive.”

In addition to better releasing opportunities, open offices also require less parking needs for tenants. “This is also less demand for parking because not everyone is in the office at the same time,” says Combs. “You don’t need all of those spaces.”

Landlords see these benefits, and more and more owners are converting buildings into open office formats. However, it isn’t all benefits. Along with open office plans, landlords also need to provide services and amenities. “Landlords are converting a lot of traditional office space to open space, and they are bringing amenities and services,” adds Combs. “For example, you have to have food available, and you have to have eating areas outside. Landlords are also having community events.”

Property managers have become integral to these new office spaces. “Traditional managers don’t necessarily know about these services and amenities, and they have really had to evolve,” says Combs. “Owners are requiring managers to be much more aware, present and engaged with the occupiers.”

Still, increased rents and better occupancy is offsetting the costs of these services and management teams. “The question is what costs are tenants willing to absorb, and we are seeing that the next generation tenant wants this and is willing to pay for it,” adds Combs. “You have to have these services to compete.”