BackAtlanta has become a leading technology hub for companies. The quality of life, availability of talent and access via the Hartsfield-Jackson International Airport have enabled technology companies to prosper. Given these dynamics for technology and other industries, the Atlanta office market has been white hot. Companies such as Home Depot, State Farm, NCR and Anthem have expanded their technology presence and signed new large leases. West Coast based companies have been securing space in Atlanta as a key hub. Organic growth of technology firms and co-working spaces like WeWork have also contributed to make the market extremely tight. Amazingly, WeWork plans to open up 20 new locations in Atlanta alone over the next two years. As a result, it should be no surprise that nearly 40% of all office space absorbed has been from technology based companies.
Developers and landlords are responding by planning and expanding their developments to attract new technology companies. These include new buildings at Avalon, Atlantic Station, in Midtown and Buckhead. Some of them, like Hines’ T3 building in Atlantic Station are speculative. That is crazy! In fact, we haven’t seen this since before the great recession in 2008.
As a result, the current real estate market favors landlords, restricting choice and creating escalating rates and more challenging terms and conditions for tenants.
This creates a major problem for a growing technology firm where good flexible space is needed to attract talent and operate productively. Funds need to be prioritized to scale the company and invest in the core business, not just in real estate. ATV, ATDC, WeWork, Industrious and Spaces do a great job supporting technology start-ups, but they need other options when they outgrow those locations.
For technology company leaders who want to create the most opportunities and leverage for their businesses, the following are the top 5 criteria to consider:
1. Location
As we all have heard, real estate is all about location, location, location.
Though technology companies are located throughout the metro area, these companies have demonstrated a strong preference to be in Buckhead or Midtown. Part of the reason is that ATV is located in Buckhead and ATDC is in the heart of Tech Square. Most millennials live in or near the city and both locations are attractive to entice and retain talent. Top-end Class A rates in both markets run $37.00 to $52.00 per square foot, which is pretty pricey for a startup, but achievable for growth stage and established companies with solid revenue and credit.
With all this activity, some vacancies are opening in the sublease market. These are all at below market rates with many providing infrastructure that allows you to “Plug n Play”. Most subleases on the market are already built out with an open/collaborative layout. That was the case when I represented Pindrop and moved them out of the ATDC to a sublease in the Biltmore, expanded them in to another sublease in the building shortly after and then restructured the lease direct to 45,000 square feet.
If you can’t locate an attractive sublease or ideal Class B space in the area, the next move would be to look at Downtown, Central Perimeter or Cumberland/Galleria markets. These markets are not quite as hot, so they offer some more attractive availabilities and lower rates, but the location isn’t quite as attractive as Buckhead or Midtown.
2. Access to Transit and Parking
As businesses continue to expand utilizing space that houses more and more people, access to transit and parking have become key issues.
If you operate a business where your employees and clients have trouble getting to you and can’t park, you are at a decided disadvantage.
Most buildings inside the Perimeter offer 2 spaces per 1,000 square feet rented. They often charge $2.00 per square foot for these spaces, which need to be absorbed by the company and/or the employees. Most technology companies require upwards of 6 spaces per 1,000 square feet rented.
In this case, ridesharing, taking MARTA, Uber or other options need to be pursued. Most new development addresses these dynamics and are locating with better transit access and larger parking options.
3. Connectivity
In today’s connected world, having suitable and reliable fiber in the building is a must have. Businesses can’t operate if they don’t have consistent access to the internet and wi-fi. As a result, it should not be a surprise that high speed fiber is a must for most tenants that my firm and I represent and is one of the first questions asked. Strong cellular service throughout is key as well.
Make sure to qualify the building’s infrastructure before short-listing and touring a space. This includes confirming fiber is in the building, what the capacity is and which company provides service. Then, when touring, browse the internet or make calls while walking your space around the entire floor to ensure there are no issues as more and more employees utilize cell phones vs. desk phones at work. Ask if the building has a WiredScore fact sheet demonstrating the level of connectivity and associated certifications. Finally, talk to other tenants to confirm they are pleased with the building’s technology performance.
4. Amenities
No longer will a gym and a common building conference room work to attract tenants to a building.
Healthy café’s, exercise classes, EV charging stations, lounges/open coffee areas in the lobby and a “cool factor” are expected for an optimal tenant and visitor experience.
Survey your employees regarding which amenities are most important to them and incorporate these preferences as part of your search.
Also, note when an existing building is sold, to remain competitive, most new owners are now investing in such amenities and updating the building to a more modern and tech feel and look. When evaluating building choices, make sure to find out history of ownership, plans to sell and long-term plans on building improvements. Keep in mind once these buildings sell and additional capital investments are made, rental rates often increase.
5. Workplace Culture
With unemployment rates hovering around 4% and a list of unfilled technology jobs in the thousands, there is a war for talent in Atlanta.
One of the attributes that separates companies is the unique culture created that reflects the mission and vision of the business and is reflective of the founders. From an office perspective, the interior build out and workplace environment should be top of the list to keep your employees, reduce churn and ensure they are not attracted to taking a job elsewhere. Open and collaborative spaces are the obvious trend (for now) and typical in every new build-out. Keep in mind to drive the ideal culture in your “cool office”, your employees need more than just generous perks such as free lunch on Fridays, game tables and scooters.
They seek an employee experience providing support for family, growth and flexibility (such as employee wellness and maternity/paternity leave), which creates a unique culture to keep them around.
Trending build-out attributes include:
- Movable furniture, dividers and temporary walls are a good idea to expand/contract a team internally, while keeping the same look and appeal
- Break out conference/meeting rooms (add more than you think you need) or small phone rooms are recommended as well, especially for wide open build outs with benching
- Sound masking can be considered as well for ideal acoustics
- Dimmable LED lighting systems to control lighting
- Collaboration furniture to hold impromptu or casual meetings
- Sit-stand/adjustable desk solutions
- Meeting spaces specific to how the company performs their daily stand-up/scrum meetings
One final note, there are tax credits available from the IRS and State of Georgia for companies that invest in technology research & development. Make sure to meet with your accountant to pursue these as they will bolster your cash flow and be impactful to your business.
I started working with technology clients seeking ideal spaces in Atlanta in 2000 and have lived through the multiple waves of this market. Tenants benefitted from a less robust market from 2009 to 2014, but the tide has shifted, limiting options and driving rates to all-time highs.
The best thing you can do to optimize your occupancy needs is make time your friend. Start the process early, ideally with 12-18 months left on lease term.
If you have office space, hire a tenant representation broker that is an expert in your field and don’t go at it alone.
There are many issues that tenants can face not hiring an expert to be on their side vs. trying to negotiate terms themselves.
This article was originally published by Ryan Bowie on LinkedIn.com and has been republished with the author's permission.
