Want Longer Leases? Look For A Coworking Tenant

Whether it is because they are rapidly growing startups or just not sure where they want to permanently hang their hats, companies today are demanding shorter leases, a trend that has landlords pondering how best to design space and structure leases to accommodate them — and those businesses that may fill the space after they leave.

During Bisnow’s Denver Office of the Future event last week at the Four Seasons Hotel, panelists discussed strategies for dealing with the paradigm shift that has companies leasing space for two or three years rather than 10 to 15 years, as they have in the past.

Unico Properties Associate Regional Director Sarajane “SJ” Goodfellow said it is critical to find out why a tenant doesn’t want to sign a longer-term lease. Then, she said, a landlord may have room for negotiation. If the company has aggressive growth plans, for example, the landlord may be able to phase the tenant into larger space within the building.

But for tenants that can’t be convinced, ensuring the space is viable for another company is they key to getting it leased quickly after they leave.

“You really have to be thoughtful about the build-out you’re doing and build generational space that will last 10 years even though your tenant will only sign for two or three years,” Goodfellow said. “It’s timeless finishes, having the kitchen in the right spot. It’s taking that extra step and talking about your building with the tenant and being a part of the process."

Another solution is to lease space to WeWork for the long term and let the coworking company deal with businesses that want short-term leases, WeWork Denver Community Director Tanya Nygaard said.

“We’re hopefully signing those 15-year or longer leases so you all don’t have to worry about it,” she said. “Then we work with companies on short-term leases. We bring a whole other tenant pool to landlords and neighborhoods.”

WeWork, which will occupy space in 10 Denver-area buildings by the end of the year, is opening 1.5M SF a month globally.

“We’re seeing what works and what doesn’t and trying to evolve with how the workforce is changing,” Nygaard said.

In terms of amenities, it is no longer about beer taps and table tennis. In today’s technology-driven world, connectivity is key. WiFi and cell service should work throughout buildings, including elevators and parking garages. And ideally, the location will help employees find a work-life balance by being in neighborhoods that let them pick up their kids from school, drop off dry cleaning or meet people at Starbucks or a bar.

“Amenities in the building are great but not enough,” Prime West Chief Operating Officer Jim Neenan said. “There have to be the amenities around them that are much greater than the building. The style of the space and the amenities they create are a key piece but not the only piece.”

With housing in Denver becoming more unattainable, Zeppelin Development President Kyle Zeppelin said workforce housing is the ultimate amenity.

“People are getting pushed further and further out, so we have employee housing we’re getting ready to get started on,” Zeppelin said of a project at the company’s Taxi development. “People can’t afford to live close in, so that’s something we increasingly have to take on.”