Written by: Melanie Jones
It seems like forever ago that I joined with 900 commercial real estate professionals at the RE Journals Event 2020 Forecast Conference in Chicago. I just registered for the same conference for 2021. It’s virtual, of course.
So much has transpired since January 2020. People packed shoulder to shoulder, enjoying the camaraderie. Little did we know how much we’d miss such gatherings. During that conference, I sat in on a robust panel discussion about spec suites, flex space, and the upsides of change coming to this asset class.
That is where I met Chris Baker, President of Zeller Realty Corporation. He enthusiastically shared ideas about the importance, value, and expansion of spec suites in supporting a shift in demand in CRE. As we see an acceleration of commercial real estate trends, the spec suite is front and center. Pretty good predictions, and leadership, in my opinion.
Recently my colleague Greg Copeland and I had lunch with Chris and Lindsey Telford, AIA, LEED GA, Fitwel Amb., Director of Design at Zeller. We asked a question I think many are contemplating these days. “What are the hardest challenges in creating and providing speculative suite options in your buildings?” The response, “managing inventory.” We discussed not having too much-furnished space sitting idle but enough availability to service demand.
This conversation got my brain buzzing and I knew I wanted to dive even deeper. Thankfully, Lindsey was ready to go deeper as well.
MJ: So, Lindsey, with so much disruption occurring in our routines, health & wellness, and the return to work, not to mention the workplace, design, and buildings, I find a huge appetite for points of view from industry leaders such as yourself.
LT: Thanks to you and your team for the opportunity to discuss these important issues and opportunities for the CRE industry. Dialogue across fields and disciplines is key to creating better places.
MJ: From your perspective, what if anything, has changed in the interest level of spec suites since early 2020? And from a design and implementation perspective, what type of changes are you considering based on input from interested tenants?
LT: Unfortunately, there’s so much market paralysis that this is difficult to measure. We do know that people are wary of spending capital for a new office buildout. Tenants are concerned about paying their rent and saving money. Because of the short term and flexible nature of what people are inherently looking for, spec suites are a natural fit.
As always with spec suite design, we aim to keep the office space as flexible as possible, providing a mix of smaller private offices and open work areas. We are also exploring reducing the number of dedicated, formal conference rooms we would typically put into a spec suite.
Common areas need to have multiple functionalities. Think, “kitchen table that has a virtual conference and screen share capabilities. This allows teams to meet and collaborate in non-traditional spaces, as opposed to having dedicated square footage given over to conference rooms and reception.”
When furnishing the space, we’re using modular furniture pods with partial height partitions; giving each employee privacy and a sense of safety. We also are prioritizing sit-stand desks, because employees have been working in less-than-ideal Work From Home (WFH) conditions for the last 6 months, and will be yearning for better ergonomics.
MJ: When I shared your thoughts on this with my team, it stirred some curiosity. What kinds of blends of commercial and residential furnishings will come together to meet all our needs? It will be interesting to see the evolution of “resimercial” expressed in changing workspaces: a little home + a little office. Of course, CORT is uniquely prepared to support this direction since we have a fantastic array of commercial and residential furniture available to rent, and is perfect for testing!
In the past, spec suites typically included furniture. I think the question many landlords are contemplating right now is this. “Do you want to be in the furniture business? Do you want to be in the asset management business?”
Would you share your thoughts on how a subscription-like approach might work in creating spec suites, flex space, and amenity areas in your buildings?
LT: A subscription-based approach to furniture would be advantageous for tenants that don’t have a firm grasp on their near-term use of space, which encompasses a large portion of the office-space users. As we evaluate vacancies and amenity spaces in our buildings, Furniture-as-a-Service may help us to swap functions and the number of users in the space more easily. We like to have furniture packages and proposals ready to go along with each of our spec suites if the tenant chooses to implement them. Price is everything right now. We have seen tenants who would typically purchase all new furniture instead go through a reseller, which cost them $8/sf instead of $15/sf. And of course, CORT’s Furniture-as-a-Service™ offering is an excellent strategy for tenants wanting to conserve cash and remain flexible.
MJ: How do you and team Zeller go about evaluating buildings and deciding what amenities to focus on? Do you see an uptick in requests for amenities and health and wellness offerings?
LT: In evaluating buildings for acquisitions, we try to focus on the bones of a building, the things that will always remain valuable and are static — location, access to natural light, overall floor plate, floor to ceiling height, etc. We are not hearing a ton of requests for long term changes to our amenities because I don’t think people yet know what to ask for.
We are trying to be leaders in those spaces, offering outdoor work areas, a fusion of in-person and online fitness classes, and resources for remote community engagement. As a landlord, we are trying to create and support the health and wellness of our occupants regardless of how many days a week they are working in the building. If you have new fitness centers, conference centers, roof decks, you’re advertising those to existing and potential tenants, but people aren’t really asking.
People are asking more about the operations of the building, cleaning procedures, air quality, etc. In the early stages of the pandemic, we created the Zeller Tenant Reengagement Plan, which was a roadmap and standard operating procedure for bringing tenants back to the buildings safely. We outlined the usage of amenity spaces like fitness centers and lounges and ensured these are updated with changing recommendations from local jurisdictions and the CDC.
MJ: It was a joy to partner with you on the Chicago outdoor amenity space you creatively tagged as the Pop-Up Work Park. My favorite line of yours around this conversation, “You have to test, right?” Heck yes, and like never before in my opinion.
In a recent Commercial Observer webinar I attended, the question was asked, “What are the most important amenities being asked for by tenants these days?” One of the most sought after amenities discussed was outdoor space.
One of the benefits of CORT’s Furniture-as-a-Service™ flexible furniture model is the ability it provides to strategically test and evaluate options as we all live through change. As you mentioned, in the case of the Pop-Up Work Park, it probably doesn’t make sense to have an outdoor space in Chicago in December, but it very well might make sense to feature the area seasonally.
MJ: How was your experience working with our team to create this space?
LT: The team was great to work with on the project. We were looking at pulling from many different CORT lines — events, residential, office, outdoor — and it was really helpful to talk things through with the team to decide which elements were essential for such a temporary space.
Bean’s 2018 “Be an Outsider at Work” campaign was really an inspiration for this project. We have always known that spending time outside leads to more productivity, creativity, and happiness. The current pandemic has accelerated the demand for outdoor workspace, and we want to be a leader in creating that space for our tenants.
Many of our suburban properties have ample room to create year-round permanent outdoor lounges and work areas. Our core and downtown properties, with limited site areas, are ripe for these temporary outdoor spaces. Having the option to rent furniture, as opposed to purchase and store, allows us to experiment and innovate.
MJ: I love hearing about the creative thinking behind this project. Sometimes the hard work behind the scenes is taken for granted. A special thanks to Brian Good on our team in Chicago for helping pull this all together!
Switching gears a little. Are you seeing, or do you expect to see, an interest in the Hub & Spoke real estate model that continues to receive attention in various markets?
LT: We anticipate seeing this manifest when the paralysis wears off. The theory goes that enlightened tenants in the future, who have 100,000 sf. today will end up keeping 60,000 sf. downtown, have 20,000 sf. in the suburbs, and downsize the remainder.
Parking downtown is expensive, so your workforce doesn’t want to commute downtown every day but will go downtown for training, important meetings, and company-wide events. There are operational efficiencies by having one office, but the benefit of flexibility will outweigh that.
MJ: And, along those lines, we spoke about a continued interest in expanding private flexible options to support the trend for more agility in the workplace and in buildings. What steps and strategies are you entertaining to support tenants preferring a private space for ten to 40 people?
LT: We are working on upgrading our conference and lounge facilities with more advanced audiovisual technology so that teams can video conference from tenant spaces outside of their own office. We recognize that meetings, presentations, and even social events will be a hybrid of in-person and remote employees, and want to help support this new company culture by allowing employees to stay connected.
MJ: You shared that your building on 401 Michigan in Chicago is (or on the way to …) providing occupiers with a “touchless day.” Tell us about this experience.
LT: The touchless day at 401 North Michigan starts in the parking garage, where we have dedicated a floor of the garage to self-parking instead of valet. A slew of proposed new security and concierge technologies will allow tenants to use Bluetooth on their phones to seamlessly enter through turnstiles and access their floor in the elevator.
A newly designed lobby features a desk and command station for the security and concierge team to seamlessly operate these technologies. Wireless thermostats will allow Building Engineers to monitor and control the mechanical systems for each floor remotely. This improves energy usage and tenant comfort.
Daylight harvesting and smart lighting controls register a room’s occupancy and light level in order to set the lighting of the fixtures. Less glamorous, but equally important, automatic restroom fixtures are standard for all of our multi-tenant floors.
The 401 North Michigan custom-designed app allows tenants to access important information like emergency alerts, amenity hours, pre-ordering food from Pine Street Kitchen, registering for fitness classes through Life Start, and staying connected to community outreach events in the building.
MJ: Did you start incorporating health and wellness into your buildings before COVID or after? Do you think these kinds of “amenities” will be required in the coming months and years?
LT: Access to natural daylight, health programming, outdoor space, green cleaning, tobacco-free campus, etc., have been longstanding pillars and best practices at Zeller. For instance, the new 401 North Michigan lobby renovation features two floor-to-ceiling living walls, and we’re currently designing an indoor/outdoor tenant lounge for another property.
Prior to COVID, we were very interested in third party verifications of building wellness, such as WELL or Fitwel. These organizations, as LEED is to sustainability, provide a star level rating to buildings that support occupant Health and Wellness. We currently have 4 buildings going through Fitwel certification, each aiming to achieve 2–3 stars. Many of the strategies outlined by organizations like the USGBC and the CDC for “healthy buildings” are already in use by our properties.
MJ: What makes the Zeller experience unique? Why should tenants explore space in your buildings in the markets you serve?
LT: A huge priority for tenants during this time has been communication and personal relationships with property management. Tenants want to know what our plan is to keep the building and its occupants safe. Zeller has been very proactive in creating a Tenant Reengagement Plan, which started back in March — outlining all of the protocols and procedures that would be implemented to reduce the risk for building occupants. We are working hard to communicate that information with tenants in many different formats — custom building apps, email blasts, newsletters, social media, and virtual Town Halls.
MJ: Lastly, what is your favorite part of your mission?
LT: Architects, designers, and builders are inherently optimistic. You’re designing for a future that you may or may not participate in. In difficult times, like the present, continuing to create is an act of defiance. It’s a recognition that we, as a community, will move past this, and an attempt to make the future a better place in which to live.
MJ: What a great perspective, and I agree 100%. The human spirit, by nature, drives us forward to continue innovation, creativity, and collaboration. I know you agree it is a privilege to play a small part in making this world a better place. Thank you, Lindsey!
Lindsey Telford, AIA, LEED GA, Fitwel Amb, joined Zeller in 2019. She serves as Zeller Development Group’s Director of Design. Her current responsibilities include the development, budgeting, and execution of capital improvement projects that are central to the business plans of Zeller assets. As Director of Design, she actively works with the acquisition, leasing, asset management, and construction teams to deliver transformative design projects and increase value.
Before joining Zeller, Lindsey practiced with Ross Barney Architects, where she led the firm’s contribution to the Chicago Architecture Biennial’s River Edge Ideas Lab Exhibit. Prior to her work at Ross Barney Architects, Lindsey was a designer at Krueck and Sexton Architects.
Lindsey is a graduate of Kansas State University, where she earned a master’s degree in Architecture and a Minor in Regional and Community Planning from the College of Architecture and Urban Planning. As a licensed architect, LEED Green Associate, and Fitwel Ambassador, Lindsey aims to advocate not only for health, safety, and welfare in all of Zeller’s capital improvement projects, but also believes that good design, human wellness, and environmental sustainability are fundamental components of Zeller’s mission.
Melanie Jones is responsible for educating, supporting, and building relationships with commercial real estate teams across the US in support of CORT’s Furniture-as-a-Service™ model. A mission-driven leader who brings the necessary energy and innovation to support change in the way furniture is utilized in buildings and the workplace.