by Ralph Rader
An emerging trend in office space design is making its presence felt around the country – and right here at Metropolitan Capital Advisors too! Many companies are focused on recruiting millennials, so many investors and developers are converting properties into creative office spaces that are more appealing. To meet this millennial demand, companies are also increasingly seeking differentiated methods of branding, recruiting, employee retention and communicating authenticity. However, a redesigned, creative office space is both fashionable and effective; a deeper look into this trend reveals why it has the attention of so many in the office sector.
What is a “Creative Office?”
Let’s (attempt to) first define what a “creative office” is. Originally, creative offices implied the adaptive reuse of an industrial property complete with exposed brick and bow truss ceilings. However, if you now ask 10 different people, you’ll likely get 10 different answers! It is, therefore, helpful to recognize what a creative office is not: it is not the traditional maze of cubes on a carpeted floor surrounded by white drywall or a long corridor of 10×10 offices where executives sit behind mahogany desks. With the limited supply of converted warehouses, creative offices are also now created from converted retail properties and older traditional office buildings. Regardless of the building type, these offices are characterized by open floor plans, informal communal spaces used for collaboration, use of natural light and amenities such as cafes, coffee shops, and fitness/recreation rooms. Other features of creative offices include an emphasis on sustainability and integrated technology (i.e. digital screens in the lobby, WiFi in common areas and smart conferencing tools).
What are the Drivers of Demand for a “Creative Office?”
The primary demand driver for a creative office space is the growing number of millennial-focused technology, advertising, media and information companies that have opened in the last X years. These companies are seeking creative office space to differentiate themselves in order to appeal to the type of talent their businesses require. Though that sounds sensible, we’re in Dallas/Ft. Worth – home to many financial services, real estate and energy companies, which are considerably more ‘traditional’. You may be wondering how this trend affects the Metroplex? Traditional office users are taking notice of creative offices as well but for a more interesting reason. To illustrate that reason, here’s a question: Which city in Texas is home to the state’s largest creative economy? It’s got to be Austin, right? Wrong! Austin may have the ‘weird’ market cornered but when it comes to being creative, DFW comes out on top. The team at the University of North Texas Economics Research Group were as surprised are you may have just been, when they compiled their report “The Economic Impacts of the Dallas-Ft. Worth Creative Economy”. Michael Carrol, director of the Economics Research Group told the Dallas Business Journal, “The sheer volume of people in those industries was surprising. Those industries tend to diversify the economy. It’s not all in a manufacturing role or the service industry or finance, for example.” The research team concluded that North Texas’ creative economy contributes roughly 205,000 jobs and $34 billion to the region annually – and it’s growing fast. Employment in the creative industries grew by 9.1% in the five-year period after the recession from 2010-2015. These are impressive results from this surprising large sector of the North Texas economy.
Examples of a “Creative Office”
There have been successful creative office projects throughout the country and several notable projects right here in Dallas/Ft. Worth. For example, Provident Realty Advisors are converting The Brewery Building at 703 McKinney Ave. into a creative office with a new high-rise apartment tower next door; Granite Properties is renovating 603 Munger Avenue to a creative office that will be rebranded as Factory Six03’ and, Goff Capital Partners’ acquisitions of six properties in the West End is the first for the John Goff’s firm. They plan on making upgrades to the brick-and-timber real estate to turn them into creative office space.
Stephen Luik, Goff’s acquisitions manager, told the Dallas Business Journal, “[t]he real driver for Goff Capital is the demand today for creative office space to attract young talent. They don’t want to go into traditional office buildings or their dad’s office. They want urban environments with walkable amenities with a space that is considered ‘cool’.” As Luik’s comments reflect, this young talent has Goff’s attention. If he and others like Granite and Provident are listening than perhaps we all should take notice.
Denver CO, another creative hub, is also home to numerous projects. In Denver’s River North neighborhood, INDUSTRY RiNo Station is being renovated into a creative office space. Built in 1969, the building is a former cold storage warehouse. Charley Babb, MCA Partner and Senior Director in our Denver office, recently secured financing for the renovation of two office buildings located between Downtown Denver and Cherry Creek North Business District for SHIFT Workspaces-Corona (“SHIFT”). The sponsors at SHIFT updated these buildings built in 1950 and 1910 to a creative office concept which fits their company’s vision of providing a variety of workspace options for professionals seeking a flexible, comfortable and productive work environment.
The Challenges of Pivoting to the “Creative Office”
Sounds easy, right? Old building plus conversion equals big returns. Well, not quite. We all know there’s no simple formula for success. Rising land, building and construction costs all add risks. Not to mention the numerous hidden costs that a project like this entails, such as structural retrofitting, or upgrading older HVAC systems. It takes a keen eye and a little luck to spot an opportunity and even then, you have to have partners and capital sources that share your vision. A trusted, experienced financial advisor can help you navigate those choppy waters. If you find yourself in need, reach out to us at Metropolitan Capital Advisors. We can get “creative” on your creative office project.