If stakeholders want to know where commercial real estate is heading over the next few years, they should look no further than tech startup industry tenants. This increasingly growing business sector is driving the commercial real estate market to offer shorter lease terms, more flexible space, and trendier amenities.
Could this be your next meeting space? Source
Cities like Oakland and San Francisco are prime models of how the tech boom has influenced the commercial real estate market. For example, co-working environments are becoming more present in these areas, allowing smaller start-ups to pay a few hundred dollars a month to rent high class office space with lavish amenities including kombucha bars, hammock lounges, and old school video games. Tech companies are constantly looking for ways to attract smart, young talent, and offering trendier workspaces is one of their top resources.
Philadelphia is seeing smaller, yet noticeable impacts from the tech startup industry as well. D.C. based firm MRP Realty just purchased the Bourse building as part of a portfolio which also includes 325 Chestnut Street and 400 Market Street. They are planning $40 million in renovations to restore the Bourse to its original 121-year old glory and simultaneously modernize it for young, urban workers. Original beams will be exposed, new wood floors will be laid, and the cheesy souvenir shops and food court will be replaced by swanky cocktail bars and hip restaurants—all part of an effort to attract tech startups like ChargeItSpot, which has already signed a lease at the Bourse.
The Bourse offers one year lease deals and will undergo $40M in renovations Source
The real attraction though, besides the new amenities, may be the Bourse’s ownerships willingness to accommodate one year leases, which is nearly unheard of anywhere else in Center City. Nationwide, building owners are feeling the same squeeze. Instead of signing 10 or 15 year lease terms, they are increasingly dropping their terms to 5 years or less to accommodate tech tenants who are willing to pay top dollar, but are uncertain of the future of their industry. Take Washington, D.C. tech startup FiscalNote, who just signed a 21,000 SF lease for just two years, with an option to expand. This legal app startup was founded in 2013, and is more than doubling their square footage from its current 8,000 SF space under its new lease. The trend is becoming more obvious—building owners are willing to take a risk on a tenant who has such exponential growth possibilities.
Related: Apple’s New HQ Video