Taking On Tech Tenants

March 23, 2015

As law firms consolidate, government offices reduce spending and corporate offices shrink their footprints, who is left to support the commercial real estate market? The answer, experts say, lies within the recent success of the technology industry. They’re putting new demands on commercial real estate property, but investors would be wise to carefully weigh the benefits and drawbacks of tech tenants.

Why are tech companies creating such buzz? A recent report places the national vacancy rate at 13.1 percent, the lowest level since 2008. Robust demand from tech tenants and increased leasing from small start-ups and tech giants alike is helping to drive the commercial real estate market. And, as recent history as demonstrated, what started in a garage can become a highly desirable, creditworthy tenant.

With several tech companies already making considerable space commitments in major markets like New York and San Francisco, more tenants will be on the lookout for areas that offer a growing population of highly educated young professionals, along with outstanding real estate deals.

What stands out to this new group of potential lessors isn’t your standard list of tenant amenities. Beyond the gym and front desk attendant, tech companies want amenities that go beyond the standard perks to cater to their employees’ sense of self.

Requests can include a lobby with personality, places to get fresh air, an eco-friendly build with green services, plenty of natural light, bike racks, proximity to fun, safe neighborhoods with an active nightlife, and access to numerous transportation options. All of that, along with flexible leasing requirements that allow for the possibility of expansion or relocation.

Think your space has what it takes to attract tech tenants? Consider these pros and cons before you draw up the lease. Tech companies can grow very quickly, which works if you have a high level of tenant rollover coming up, but doesn’t if you need a long-term tenant and can’t accommodate the growth. Also remember that stemming building vacancy with a fast-growing tenant is ideal, until the property’s tenant mix lacks diversity and becomes risky. Finally, while tech tenants can make your building a hot destination with plenty of personality, future tenants may wish to be more conservative and pass on a space that has become too quirky.

The commercial real estate professionals at Intelica can help you determine whether a tech tenant is the right fit for your portfolio. Contact our Office Services Group today to learn more.