A growing number of companies – led by defense contracting firms which need to establish operations quickly – are finding spec suites are the immediate answer to their real estate requirements.
The concept, which is short for “speculative suites,” significantly quickens move-in schedules because these spaces are finished, turn-key and ready-to-go, including furnishings. Choosing this option allows companies to bypass the lengthy real estate search and build-out phases, while also providing the luxury to more extensively survey the market for a long-term solution.
Image courtesy of COPT Defense Properties.
“Speed is the primary motivation but not always at the expense of a best-in-class building or great location,” said KLNB Principal Joe Nolan.
He explained that savvy developers and landlords are beginning to carve out a portion of their buildings to cater to these situations.
“These deals enable developers to get rental income sooner than later while, in some instances, act as incubator space where the company later moves into a different building in the portfolio,” he said. “Once the relationship is established, there are opportunities to establish tenancy on a longer-term basis.”
Bill Barroll, Chief Business Officer for COPT Defense Properties Trust, said “over the years, we have developed multiple spec suites, predominantly in our Columbia and Tysons Corner portfolios. What we found is that many smaller tenants cannot wait for elongated, build-out processes and, instead, are taking advantage of these immediate move-in opportunities. The lease term is longer than most might realize – typically in the five-year range.”
The group’s CIRQL concept is billed as “small spaces for big ideas” and offers community kitchens, conference space, community lounges, and flexible leases.
“We carved out 20,000 square feet, with the spec suites encircling an amenity space that is placed in the middle,” Barroll said. “One benefit we found is that, once we make the initial investment, there is no secondary reinvestment needed once the term expires and the tenant exits.”
“When landlords have spec suites already built out and ready to go, it gives them a competitive advantage because they show a prospective tenant exactly what they will get and can guarantee delivery almost immediately,” said Kevin Keane with Hyatt Commercial. “The concept is growing in popularity, particularly in suburban office markets and has proven to be a home run for many landlords. I have seen companies move into their space in as little as one week.”
In this article: COPT Defense Properties, Hyatt Commercial and KLNB.