Office Landlords Increasingly Taking a Leaf from Residential Real Estate by ‘Staging’ Smaller Units to Appeal to Growth Tenants

Landlords use office ‘staging’ to fill pockets of vacancy within their portfolio

Toronto – February 7, 2017 – Most are familiar with the concept of ‘staging’ when it comes to residential real estate; the practice of strategically furnishing and designing a home to increase its appeal to potential buyers. Office landlords are now increasingly adopting the practice by staging office spaces to attract SME and growth tenants to their portfolios. According to CBRE Limited’s (‘CBRE’) report, Office Staging: Commercial real estate takes a page from residential real estate’s playbook, office landlords are building out empty floor plates with meeting rooms, kitchens, a mix of office and open work areas, and functional reception areas to allow business owners to quickly visualize their business in the space. Additionally, it eliminates the need and the additional associated risks of designing and fitting out office space from scratch.

“First impressions in real estate – residential and commercial – are key in selling a potential occupier on a space. For office landlords, compared to the alternative of simply presenting a tired or empty floor plate, office ‘staging’ allows a potential tenant to easily visualize their business in the built-out space and picture their operation’s future success. Much like a person looking around a staged home can picture their family living and growing there,” commented Werner Dietl, Executive Vice President and GTA Regional Managing Director of CBRE Canada. “However, unlike residential staging where once a showing concludes, the furnishing is removed, the office staging remains intact even after the tenant moves into the space. In fact, it’s an attractive selling point as these staged offices are geared towards small businesses that are focused on growing and don’t have the expertise or time to facilitate building out a functioning and flexible office space.”

Office staging is a growing trend among landlords as they look to not only attract new tenants but also fill pockets of vacancy within their portfolio. Typically ranging from 1,000 to 5,000 sq. ft., these smaller, staged units have shorter lease terms and are leased at a premium to offset the landlord’s capital investment. “Considering how nearly 90 per cent of businesses in Canada employ between one and 19 people, it’s no surprise staged offices are growing in popularity, vying for businesses that have grown out of their co-working space phase,” added Dietl.

The natural progression of many growing companies today begins at incubators and co-working spaces, where leasing commitments are flexible and range from as little as an hour in occupancy. However, as CBRE’s report found, when companies grow past more than three employees, more permanent and cost-effective solutions are necessary.

Much of the office staging is performed in ‘term spaces’, where larger tenants have first right of refusal on vacant space. Staging the office allows for shorter term leasing to small businesses, de-risking landlords’ relationship with larger tenants and building new ones with growth tenants. In addition, landlords of Class B and C properties can stage office spaces and better compete with new builds by offering tenants modern amenities and layouts.

“For landlords, having growth tenants occupy these built-out spaces is a long-term play. Canada’s start-up scene has exploded in the past few years. We’ve seen the likes of Shopify and Hootsuite breakout and gain international prominence. Such organizations, when they expand and require more real estate to operate, can graduate from staged spaces to traditional office spaces, and the landlord has the opportunity to grow the company within its own portfolio,” concluded Dietl.

For further insights and commentary, download CBRE’s Office Staging: Commercial real estate takes a page from residential real estate’s playbook report.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2015 revenue).  The Company has more than 70,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 400 offices (excluding affiliates) worldwide.  CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services.  Please visit our website at www.cbre.com.

In Canada, CBRE Limited employs approximately 1,885 people in 20 locations from coast to coast. Please visit our website at www.cbre.ca.