Five years ago, Manhattan office landlords tended to build out smaller spaces just nice enough to attract tenants. Light wood doors, inexpensive carpeting, dropped ceiling tiles and maybe a pantry with a microwave usually did the trick.
Tenants today are expecting more.
At 145 E. 57th St., owners ABS Partners Real Estate and Benenson Funding Corp. drew inspiration from luxury residential condominiums when designing the prebuilt office space on six floors, said John Brod, a partner at ABS. The $20 million improvement project includes large pantry spaces with oversize marble islands, Miele brand convection and microwave ovens, faucets for both sparkling and still water as well as subzero ice-makers.
Because new office design incorporates many elements from the home, the partners studied finishes used in ultra-high-end condo projects such as 432 Park Ave., Mr. Brod said. They wanted to stand out now that landlords building out unleased office space for smaller tenants has become widespread. The owners spent an estimated $140 a square foot, he said.
"There are a lot of prebuilts and they all look alike," Mr. Brod said. "We specifically set out to build a better product."
In a competitive office market, landlords are taking a bigger risk, spending more to build finished office spaces before leasing them out. They hope to make the idea of relocating less daunting for tenants and fill empty space more quickly while maintaining and boosting rents, brokers and real-estate executives said. Landlords also have been willing to build out larger than typical spaces, some exceeding 20,000 square feet, brokers said.
Keeping up with competing office space means using expensive concrete polished floors, exposed, finished ceilings, glass partitions and higher-quality LED lighting.
At 601 Lexington Ave., Boston Properties Inc. created two prebuilt spaces on the top floors, creating large pantries with stone counter tops and installing high-end stainless steel appliances as well as marble floors in the reception area, according to the company.
Landlords might be spending more now, but they figure that their investment in high-end prebuilts will also give them the flexibility to do shorter leases, serving multiple tenants leasing the same space over time, said Andy Levin, senior vice president at Boston Properties.
Write to Keiko Morris at Keiko.Morris@wsj.com
(END) Dow Jones Newswires
November 05, 2017 09:14 ET (14:14 GMT)