Repositioning The Commercial Office Building

Part One: San Francisco
by Sascha Wagner, IIDA CID LEED AP
swagner@huntsmanag.com

During economic downturns, competition among building owners for office tenants usually becomes fierce. It’s a function of simple math: More properties are competing for fewer tenants. Down-cycles in the market can be an opportunity for building owners to take advantage of lower construction costs and improve their properties with the aim of attracting high quality tenants. However, the challenge is to make the right moves to meet the needs of the leasing market, taking into account the building’s location, amenities, floor plans, as well as its competitors. While tenants may be looking for serious bargains in the current economic climate, the choice is never just about money—they are also looking for the right home for their company. Repositioning is about giving a building a lease on life – creating a new identity that will give tenants the quality and cachet they’re looking for.

Lack of maintenance can leave any commercial building looking worse for wear. But even well-designed and maintained buildings can begin to appear dated over time. Take the case of San Francisco’s Embarcadero Center West at 275 Battery Street. Designed by John Portman in the 1980s as an extension of Embarcadero Center, the high-rise’s public spaces had lost some of their original elegance with the passage of time. Recent vacancies on multiple floors created opportunities for the owners to lease large swaths of space. However, a bit of a makeover was required. Making the building attractive to contemporary tenants—with the legal profession particularly in mind—involved remodeling the lobby, elevator cabs, and elevator lobbies to give the building a modern, unified visual identity.

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275 Battery Street before and after its building lobby remodel, completed in 2008 (photography: Sharon Risedorph)

In other cases, the building may never have had a strong visual identity – perhaps due to local adjacency planning criteria – which can provide an opportunity to create one. 100 Van Ness was built in the 1980s as a slab-style high-rise with a fairly nondescript character. It’s currently undergoing a repositioning effort that involves transforming the building lobbies and elevators. In this case, the main entrance lobby is being “pulled outside” to make a visual statement on an otherwise blank exterior.

A proposed lobby redesign for 100 Van Ness will increase prominence of the building entry.

Real estate brokers play a key role in working with building owners to reposition buildings – not only helping refine the target market, but also advising whether the floor plates are the right size or offer the right flexibility for the desired tenant group. Sometimes architectural interventions are necessary to adapt the structure. 123 Townsend (The Townsend Building), a historic building in San Francisco’s multimedia gulch, has 21,000-square-foot floor plates that were served by only two staircases. In repositioning the building, the design team collaborated with the brokers and proposed adding a third stair, which would enable the floor plates to be divided into thirds. Each floor can now be leased in 7,000-, 14,000-, or 21,000-square-foot blocks. This added flexibility for future growth was appealing to the targeted audience of young technology companies just starting out—they could begin with a 7,000-square-foot piece and expand in increments as their business grew. Upgrading the building’s capacity to handle significant technology infrastructure, and remodeling the lobbies were also part of the effort. After the repositioning, the brokers leased the entire building to multiple tenants within a year.

The lobby at 123 Townsend (118 King) creates an urban loft-like entrance for the building’s creative tenants.

Developing a long-term plan for adding green design elements to a building can go a long way toward attracting tenants in the technology creative fields, for whom sustainability is often a significant part of their identity. The repositioning of 634 Second Street involved the development of sustainability criteria and a long-term strategy for meeting LEED for Existing Buildings requirements, as well as remodeling part of the façade, adding a new passenger elevator and roof deck, and upgrading the lighting, electrical, mechanical, and plumbing systems. With these new features added, ServiceSource, a service performance management company, leased all three floors. Other sustainable strategies that can make buildings stand out include bicycle parking areas and sub-metering for electricity, which allows each tenant to reap the benefits of their own energy conservation measures.

634 Second Street’s new roof deck provides its ServiceSource tenants an outdoor amenity and green space.

Repositioning does not have to be comprehensive or expensive. Instead of replacing the stone in a lobby, for example, adding area rugs, draperies, and new signage and directories can provide a fresh look. Perhaps the guard desk can be resurfaced instead of replaced. Installing new energy-efficient bulbs can reduce electricity consumption and offer improved lighting quality at a fraction of the cost of replacing entire light fixtures. In some cases, costs for systems upgrades can even be rolled into ongoing maintenance budgets. Regardless of the scope of upgrades, any repositioning effort should be done strategically and with expert advice. Getting a building filled with tenants by spending money on improvements can certainly be seen as a chicken-and-egg scenario. But spending money wisely can pay big dividends down the road.

Part Two of “Repositioning the Commercial Office Building” will look at some specific repositionings in New York.

Sascha Wagner, IIDA CID LEED AP is a Principal at Huntsman Architectural Group and has assisted building owners and real estate developers with building repositioning projects in the Bay Area.