How snappy, pre-furnished office spaces get companies moving fast
For instant gratification, tenants needing up to 20,000 square feet are snapping up fully furnished pre-built offices that are designed with a hospitality-infused vibe.
Meanwhile, owners hope that by wrapping up the lengthy build-out process on the front end, they can compete with the nearly 25 million square feet of sublease space now available in Manhattan alone.
“It is still very difficult for landlords to compete with heavily discounted sublet rents as they have lenders and investors that monitor their rental rates,” said Ruth Colp-Haber, CEO of Wharton Property Advisors who specializes in sublets. To win the deals, “landlords are starting to offer turnkey space with the furniture in place.”
Tenants also want to hang onto their cash, not wait months to get into the space and pick a term tailored to their business. “Capital preservation by tenants has gotten really critical,” added Matt Astrachan, vice chairman of JLL, on the cost to buy furniture and fit out offices. “It’s also supply chain avoidance.”
The ongoing supply chain issues that arose during the pandemic also made tenants fret about when they could get their furniture and actually move in. To relieve that anxiety, Craig Deitelzweig, CEO of Marx Realty, launched Marx Ready pre-builts.
“We put in furniture that is aspirational,” he noted. “It’s something they want and gets them excited.”
To make a faster leap from leasing to working, the Durst Organization kicked off its Durst Ready furnished pre-builts in 2019. They have since completed over 31 transactions totaling 350,000 square feet and averaging five- to seven-year terms.
Lauren Ferrentino, managing director of Durst’s commercial portfolio, explained, “We are not only speaking to the tenancy that needs a short-term solution but also those who just need plug-and-play space for longer terms.”
That’s why the core offering, Durst Ready, is fully furnished and wired pre-built spaces.
“Effectively, all a tenant needs to do is call their internet telephone provider and have the suite activated,” said Eric Engelhardt, senior vice president of Durst.
Justin Myers, executive managing director and principal of Lee & Associates NYC, has toured multiple furnished pre-builts with his clients. “It seems to be resonating with tenants,” he said.
The Empire State Building is offering a 22,620-square-foot prebuilt on the 68th floor designed by Fogarty Finger. “It was furnished with really nice furniture,” Myers recalled.
Empire State Realty Trust’s CEO, Anthony Malkin, said the floor serves as a model for other spaces. Its asking rent is $79 a foot — and would be about $75 per foot without furniture because there wouldn’t be a period of free rent for construction. “We want to present people with the easiest pathway to get a deal done,” Malkin said. ESRT will therefore pre-build with or without furniture and/or wiring.
The building owners say additional pricing for furnished spaces can range from nothing to as much as $20 per foot, depending on the size of the space, the furnishings and technology. But most insisted that the costs largely even out because they no longer have to provide months of free rent, tenant improvement allowances or work letters.
Jane Luger, vice president of Taconic Partners, is rolling out furnished pre-builts at Essex Crossing’s 145 Delancey St. “It’s been a wild success,” she said of other buildings. “By the time the lease is negotiated it’s ready,” so the owners get their revenue stream faster and tenants get to work.
“Imagine being from a space occupier perspective and the relief you would have from leasing a space that is pre-furnished?” said James Keenoy, president of Farrell Flynne, a procurement company which is executing the furnishings for Taconic. The Essex Crossing space includes 14,000 square feet of offices on the third floor plus 7,500 square feet on the second floor for shared collaborative amenity space.
“We are keeping the furniture a neutral palate and using plants and art to give the pops of color and make the space bright,” Keenoy explained.
Greg Kraut, Co-Founder and CEO of KPG Funds, is sourcing the furnishings himself for their boutique office properties, which include 446 Broadway, 40 Crosby and the upcoming 142 W. 14th St. — a reinvention of a former Salvation Army building.
“It’s white glove, high design and we focus on the kitchens and bathrooms and easy-to-use technology,” Kraut said. “We put in these beautiful changing rooms with a full shower and it’s gorgeous — it’s like a high-end hotel.”
Meanwhile, RXR offers modular spaces that can be rearranged without building permits.
“The tenant can change their mind and say, `I want it all open plan,’ and we make that transition over the weekend,” said William Elder, managing director of RXR.
But Luger admits that one size can’t fit all: “With pre-builts you won’t get it 100% right,” she said. “But you do win deals.”