Landlords Embracing Co-Working Firms And Commitment To Tech Infrastructure, But To Varying Degrees

Changes to the workplace pioneered by tech firms in Silicon Valley—think collaborative workspaces, an emphasis on built-in tech infrastructure, etc.—have officially gone mainstream. To get a better sense of what that means for tenants, landlords and everyone in between, Bisnow talked to a few panelists who’ll be speaking at our 4th Annual NYC Workplace of the Future event on June 21.

Traditional landlords have been somewhat slow to embrace new demands for collaborative office design and a tech-forward focus. That's left the door open for the breakaway success of co-working providers, whose business model basically boils down to leasing space and curating it to more carefully reflect the changing needs of tenants.

That’s starting to change, however, as some developers begin to work more closely with co-working firms, and even adopt some of their design features in their own buildings.

RXR Realty, for example, has embraced certain aspects of the collaborative office aesthetic in its properties like the Starrett-Lehigh building, where it recently began focusing more closely on creating collaborative common areas, says president Michael Maturo. 

RXR also leases space to firms like Convene, Servcorp and Regus—firms that aren’t quite full-on WeWork-level co-working providers, but similar. Mike says RXR has embraced co-working firms to some extent, but that it’s important to be strategic about it.

“If you plan carefully and locate those types of firms strategically in the building, we believe they can be a net asset” to the other tenants, who can also make use of the services and other amenities provided by those firms, he says.

Mike says he’s wary of leasing so much to a co-working firm that it would single-handedly set the mood for an entire building, however, and he says he also doesn’t want to see people hanging out in hallways and otherwise "creating an uncomfortable environment" for the other tenants.

Granit Gjonbalaj, WeWork’s head of development for the Americas, says overflow problems are a common concern for many landlords when weighing whether or not to lease to a co-working firm. They're all worried about “the stress placed on the infrastructure, like elevators and the plumbing” due to the higher volume of employees that make use of co-working spaces.

Those concerns notwithstanding, he says some developers have gone all-in and embraced the co-working trend with open arms.

A case in point is the Brooklyn Navy Yard, where Boston Properties and Rudin Management collaborated with WeWork on Dock72 (above), a 675k SF office that represent's WeWork first ground-up development, and where the co-working firm will take up 222k SF itself.

Not all landlords have been so forthcoming.

About a year ago, for example, Empire State Realty Trust CEO Anthony Malkin told The Real Deal his firm would resist leasing to co-working providers, based on the logic that “when these companies grow up, they’ll want a real building and a real landlord.”

Arie Barendrecht, CEO of WiredScore, which certifies buildings for best-in-class connectivity and works with landlords to help provide it, says that as more firms across all types of industries come to depend on internet-based solutions, they’ve begun taking a much closer look at their building’s ability to provide Grade-A connectivity.

“The most advanced videoconferencing software or cloud-based analytics solution doesn’t mean anything if you don’t have uninterrupted access to it in the workplace,” he says.

Mike says that as tenants have caught on to that fact, landlords have begun to pay attention as well.

“Lately we’ve seen some types of firms crossing buildings off their list” when looking for office space if they don't have “a certain degree of tech infrastructure,” he says. “Or we see lease signing delayed by two to four weeks because a firm’s CTO will have to fly in and audit the building. In the aggregate, the money lost during that process really starts to add up.”

Similar to Boston Properties and Rudin's decision to bring WeWork in on the ground floor of Dock72, Arie says WiredScore has increasingly been brought in during the planning stages of a new development, to ensure buildings’ tech infrastructure is on point when the construction finally wraps up.

WiredScore is working with the developers of 25 Kent, Dock72 and other ground-up projects to ensure their tech infrastructure works well now, and stands the test of time.

“It’s impossible to know what kind of technology tenants will want three to four years down the line,” he says, “but it is possible to put in place the fundamentals that’ll allow you to handle it when the time comes.”