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Growing Austin

Sharing real estate tips and tricks and all of our Austin favorites - Northside, downtown and everywhere in between.

6 Tenant Density Trends Here to Stay

Having participated in several high-density tenant transactions on downtown office portfolios, a few recent trends have become apparent. Spaces are moving away from the traditional law firm density standards and evolving with the booming tech industry in Austin. Five employees per 1,000 sq. ft. is now seven. These shifts are here to stay and for property managers, brokers and owners, density’s impact is a factor to consider.

Here are six items to be mindful of prior to final lease negotiation and space planning.

1). Parking Ratio – What’s the building's parking ratio? Denser tenants need more parking; be mindful of this impact on your building.  Parking is the first tenant encounter with the asset and a positive experience is essential. Adam Raffle of REIS Associates recommends not overselling your building more than 120% not including reserved spaces. If your building is completely full look into other options to solve for density such as Luxe, a white glove valet service.

2) Electrical Capacity – Higher density means electrical loads may reach capacity. Does the electrical switch gear allow for the additional lighting, internet connectivity, electrical outlets and HVAC equipment that will meet your tenants’ needs? Blue Ocean Energy is an energy management company that can evaluate your capacities. Remember that tenants expect internet connectivity 24/7 and Wiredscored can help you evaluate your equipment needs.

3) Air Conditioning –Texans take A/C seriously. There’s nothing worse than overheated tenants and managing temps can be extremely complex with additional head count. Adding fresh air or cooling to older buildings gets tricky because the HVAC and accompanying chases are typically integrated in the building's core. Tech tenants tend to utilize the space many more hours in a day, so equipment life cycle costs need to be considered.

4) Bathrooms – Yes – I am going there, we all do. High density tenants use bathrooms a lot, especially when they are provided 3 meals a day, plus snacks. Anticipate tenants going to other multi-tenant floors for “more privacy” and require tenants to hire day-porters to maintain their bathroom. Expect bathroom supplies to go up for budgeting!

5) Elevators - No one likes waiting for the elevator – it’s awkward standing around with strangers. The increase in trips as a result of increased head-count will stress older elevators and result in longer wait times and poor performance.  An elevator upgrade may be needed to support density.  Interior stairwells, while often expensive can also be a solution.

6) LEED Certification - Will density impact LEED or Energy Star ratings?  Economizing is difficult when a building is working hard to maintain occupant comfort. Adding electrical power and transformers and increasing the watts per SF of the building can impact ratings.  Bo Peterson with Blue Ocean Energy recommends measuring density’s impact on energy ratings so you know what to expect before committing.

The real question is what happens if you don’t consider your tenant base? From both an investment perspective and with regard to keeping an eye on tenant needs, strive towards having a tenant mix that does not result in an unduly heavy load on your building. 100% occupancy is the obvious goal, but not at the price of occupant comfort and building functionality.

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