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You can’t just build it to make them come.
What if we told you you could yield a 10% productivity increase that could conceivably pay for your office real estate every year? Talk about an ROI.
In an age where office talk echoes from social media memes and headlines to the water cooler, gym and even (quite literally) the bank—and beyond—the best business investment isn’t in real estate. It’s in people.
That’s precisely the thinking behind Highwoods Properties’ EVP/COO Brian Leary’s 1/9/90 rule, where 1% is spent on annual recurring costs like utilities, 9% on real estate and 90% on people. Yes, 90% on people—though to be clear this is for a typical org, not, say, one building nuclear power plants or airplanes, quips Leary.
“A lot of people focus on the 9%,” explains Highwoods SVP and Raleigh Market Leader Thomas “Skip” Hill. “‘Oh, I got a great deal on price per square foot.’ … But you have to focus on the 90%. What do they need or want? [The rental rate] is important—don’t get me wrong… but people need to be centered on the talent.”
That doesn’t mean you just throw up “pickleball courts, a beer tap and rocking chairs out front,” says Kimarie Ankenbrand, Raleigh/Durham lead and managing director of global commercial real estate leader JLL. To attract and retain talent, she says, there’s a different definition of activated space, a compelling ecosystem, which dovetails into the 1/9/90—a concept similar to JLL’s 3 / 30 / 300 mantra, illustrating the average weight between a company’s costs for utilities ($3), rent ($30) and payroll ($300), all per square foot per year.
“Developers can go build these beautiful buildings and all these nice amenities,” clarifies Ankenbrand, “but you have to have leadership who are helping bring their teams along to see the bigger picture of how, when they come into the office and are moving around within the community and spending dollars, that is impacting making this a thriving, vibrant community everyone wants to be in.”
Ultimately, “having too much space or having ‘dumb’ space isn’t smart,” echoes Leary, “but many decisions about the office—most particularly prepandemic—were made from a spreadsheet, and not from a true understanding of outcomes.”
Ankenbrand nods to Centennial Campus as indicative of the 1/9/90 rule in action. There’s a reason people want to be part of the NCSU ecosystem, and they’re willing to pay a premium rate to be part of it. “It’s not just amenities—it’s a different definition of an activated space and a compelling business reason to be part of an established thoughtful ecosystem,” she says, “where a more holistic approach has to be considered—and puts pressure on more collaboration between developers, the city and the private-sector community leaders.”
The mantra could explain why we see some newer in-market construction buildings on an island struggling to lease up. Just because you go build a shiny new building and put a really outfitted gym in the bottom doesn’t mean they’ll come. “It really has to be part of a broader ecosystem hitting on a number of different wishes, wants and needs from not just the office-users—but from the people living in the community, the visitors, etc., that they can all take advantage of,” says Ankenbrand.
We’re seeing that in DTR and North Hills; Hub RTP will check all those boxes—as will the development around Lenovo Center by visionary Dallas-based developer Pacific Elm Properties serving up sports, hotel, office, live music, commercial and entertainment retail, all wrapped in one. Think like The Battery in Atlanta, adds Ankenbrand: “You can kind of see where the puck is moving.”
In essence, it boils down to what Leary calls a “commuteworthy” elevated workplace experience. That is what positively impacts the health and happiness to improve outcomes and recruit top talent—“and in some cases increases productivity on the order of 10%.” So, basically, you get what you give.
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