Leather scents, cafés and daily bar carts: Office tenants push for more amenities

What does it take to get prospective office tenants to sign a lease these days?

At 10 Grand Central, a boutique Midtown office building, one tenant needed a written guarantee that a bar cart would come out at the end of every workday for happy hour.

“I think that’s what got them to sign the deal,” said Craig Deitelzweig of Marx Realty, which owns the building.

Another of his tenants requested in the lease agreement that the building’s signature scent—hints of leather with lemon and vanilla notes—also run through the ducts in its own office space.

One leather goods company even asked that Deitelzweig wrap all the building’s furniture with its leather before it’d put pen to paper, but those negotiations didn’t make it very far.

“People want a compelling reason to go back to work,” he said. “They want to be with the right people and be in a space that they think is beautiful and feels great.”

In a market where office buildings are just 15% full and rents are dropping, tenants hold the negotiating power. Landlords are finding it hard to turn them down.

To get companies interested in returning to their offices, landlords are trying to make their buildings more appealing.

Common areas that attract lots of people—which at one point had been a liability for landlords as social distancing became the norm—could now be a great asset.

“Amenities used to be a box-checker, but now it’s a requirement,” said Bill Elder, a managing director at office landlord RXR Realty. “They won’t tour an asset if it doesn’t have some sort of an amenity.”

At RXR buildings, that includes large conference rooms in common areas and in-office dining options such as a café and a speakeasy.

Tenants can use the landlord’s technology platform to access amenity space in any RXR-owned building, not just the one where they rent space.

Several tenants have shown interest in flu shots and other health care offerings.

In some buildings that now have amenity space, the firm had not planned to include any, Elder said, but it’s a different market now.

“We knew it was for the benefit of the tenant and also to compete with some of the other offerings out there,” he said.

At newly built One Vanderbilt, real estate investment trust SL Green has designed the Vandy Club—a 30,000-square-foot floor with massive meeting spaces, a lounge area, and a café and a proper restaurant from chef Daniel Bouloud. There’ also a terrace.

“Now you’re providing a service,” Nuveen Managing Director Nadir Settles said. “That’s what real estate has become: more of a service than brick and mortar.”

In its Manhattan properties, Nuveen has incorporated golf simulators and a high-end restaurant at 730 Third Ave. and yoga studios at 780 Third Ave.

Tenants at Nuveen buildings can access the amenities at other buildings that the real estate firm owns.

“We want people to use the building as more than just a functional office space,” Settles said.

Power struggle

These days, offices are still reporting occupancies below 20%. The amount of empty office space in Manhattan reached new heights last month and stands at a record 17.1%, according to Colliers International data.

That’s pushing down rents in Midtown, the Financial District and other key commercial districts. Potential tenants are driving a hard bargain. On average, asking rents fell to $79.69 per square foot. Further downtown, they dropped to $60.09 per square foot, the report said.

Prospective tenants are haggling over the type of furniture and decor in common spaces, real estate lawyer Ida Phair said.

“They’re looking more toward the future and thinking people want to come back and have a nice office space,” Phair said.

One of her clients, a financial services firm, tried to get its new landlord to agree to a mid-century modern look in a conference room and to give the tenant say over any changes made to the space.

Although the landlord didn’t agree to furnish the room the way the tenant requested, it did agree to run future changes by the firm.

“As long as the tenant is willing to pay the rent the landlord wants, the landlords are a lot more accommodating,” Phair said.

The focus on amenites is interesting, she added, given how fearful tenants and landlords were of them at the height of the Covid-19 pandemic.

At the time, common areas were considered danger zones. Most landlords had closed off such spaces to tenants and took extraordinary measures to make sure people weren’t too close to each other.

RXR offered tenants an app that could tell them which areas of their building, such as kitchens or bathrooms, were most congested.

At Park Avenue Plaza, owner Fisher Brothers removed the seating in the building’s atrium altogether. As in most other buildings, the number of people who could ride an elevator together was limited.

Since then, the real estate firm has returned the furniture to the atrium and reopened its amenity floor at 1345 Sixth Ave. It includes a lounge, a fitness center, food and beverage options and a coworking space.

The space has been a big draw for tenants, Fisher Brothers partner Ken Fisher said.

In May the company announced a $120 million plan to improve the property with a Wi-Fi-enabled public park, art installations and a contactless elevator. It’s preparing to open a second, similar common space at 605 Third Ave., Fisher said.

“Office is no longer a commodity where you just had a great location that was easy for people to get to,” Settles said. “Office has become a lifestyle.”