Boutique Offices Emerge as Strong Option for Tenants Seeking Less Space

A new trend is emerging in the troubled office space, one that an expert tells GlobeSt.com could become a more commonplace product in this category as it gain traction: the boutique office building coupled with amenities.

With the work-from-home trend picking up since the onset of the pandemic, office space is less of a need now.

According to a report from CBRE, office space requirements between 10,000 and 20,000 square feet have increased by seven percent since 2019, as of April. Larger ones, ranging from 50,000 to 100,000 SF have dropped 38 percent. And those larger than 100,000 SF have plunged 36 percent.

BEHIND THE SHIFT AND KEEPING EMPLOYEES HAPPY

Allison Greenfield, principal of Leviathan Development and chief development officer at Lionheart Capital, which focuses on a mix of real estate asset classes including office, shed some light on the shift.

She told GlobeSt the trend has taken us from “where you had a floor plate of like 30,000 square feet [with] your company on one floor, and everyone would be there together,” adding that “[It's no longer really what office spaces are calling for. They're calling for more adaptable and smaller spaces."

Of course, that might present a challenge for older buildings with high density  but that's the new reality. Many employees today are either fully remote or work a hybrid schedule, with the latter of the two indicating that office isn't completely dead just yet. But still, the Great Resignation happened post-COVID and could occur again. So it will be up to employers to keep workers as happy as possible. And the boutique office style might be one way of accomplishing that thanks to its smaller space.

"You don't have to go through giant lobbies with security, and badges," Greenfield, who focuses on Miami and Florida, said.

"You go right into your space."

THE SMALL SPACES SERVE AS HOME EXTENSIONS

Also, the design of the building might take some weight. For example, Greenfield cited a 20,000-square-foot property project, called MIRAI Design District, which has four small offices that Lionheart has in its portfolio. It was designed by Kengo Kuma.

"We're using a masterful, world-renowned Japanese architect known for his not only great design and his minimalism in the Japanese sense of the word, but for his need to use nature and incorporate nature holistically into his design," she said.

Plus the property has entrance levels from both the street and parking area below the building.

Tathiana Rosado, president and founder of Ciao Studio, a luxury lifestyle PR agency, told GlobeSt. that boutique offices for some are serving as "an extension" of homes.

URBAN VIBES ARE KEY

To make a boutique office work, it will need to be in an urban area, according to Greenfield.

"I think in the urban areas and the boutique way we're seeing is very special.  We're thinking about stuff you want to see in a high-end residence [and that] you want to see in a high-end office nowadays.”

Plus, those types of settings will surround a variety of retailers, restaurants, and other amenities that should be within walking distance from the office.

Not only is the boutique style more appealing for workers – but it’s also mutually beneficial to tenants because of the potential cost savings versus a traditional building.

“If you have a smaller footprint, even if the rent goes up, you’re obviously going to spend less money on your on your office,” Greenfield said.

BOUTIQUE COULD BE THE FUTURE NORM

As troubled as the sector is right now, the office still has a future albeit one with a different profile. Greenfield thinks that we will never be fully remote. She noted that the world is going through a “technological revolution,” with the work-from-home trend and it’s improving the work-life balance. However, the human element remains. The interaction in person is something that online meetings can’t match. A boutique office offering amenities, with a hybrid schedule could be the right balance for everyone.

“It’s necessary, as well as more productive, to have that hybrid,” said Greenfield.

But right now, boutique offices are not yet quite the norm and are far from it, according to Greenfield. That said, it could get there and she thinks that if it does normalize – the small spaces won’t be referred to as boutiques anymore.

“Companies are looking for these spaces, they can’t find them,” Greenfield said.

“They don’t have any buildings to offer them. So there’s just the first in newer cities where development is never easy, but it’s easier than in older cities. You’re starting to see this trend with some wonderful buildings coming on the market, and the response is amazing. They’re all rented out.”

She added that there is a “severe supply constraint” on boutique buildings, currently.