Spec suites – spaces that are built out by a building owner for the purpose of marketing a vacant suite or floor – are growing in popularity and in size, with new projects devoting entire floors and buildings to spec space.
“The concept of the spec suite is powerful,” said Bill Baldwin, a tenant rep broker with Cresa. “Some tenants might need space right away and this presents an immediate solution, while for others, the bigger issue is one of visualization. It is very hard for the layperson to walk through a space that was designed for someone else five, 10 or 15 years ago and visualize what could be for their current needs.”
Spec space is more popular than ever, according to a broker panel at the CREJ Property Management Conference that included Jamie Gard with Newmark Grubb Knight Frank, Doug Wulf with Cushman and Wakefield, and Alec Wynne with Avison Young. For A- and B buildings, ready-to-go spec space does not fail, they said.
By preparing the space as ready to go, you instantly go to the top of the list for prospective tenants who fall behind on their planning, Baldwin said.
Through a successful built-out spec suite, a property manager can take a previously unleasable space and reimagine it in a way that can capitalize on the positives, said Michelle Liebling, Gensler’s senior associate and design director.
There are risks associated with speculative space, however, because the building owner is assuming the space will meet a prospective tenant’s needs without too much extra cost devoted to additional tenant improvements, said Chris Nichols, business director of Tenant Planning Services.
“Building a spec space may not always be a smart investment for property managers,” he said. “Depending on the quality of the building and types of tenants interested in those buildings, as well as the current build-out of any vacancies, it may not make financial sense to spend improvement dollars upfront before consummating a lease with a tenant.”
When debating the financials, many might consider “hypothetical space,” said Nichols. Hypothetical spaces are renderings that are intended to give prospective tenants a vision of what the space could look like. There is less risk on the building owner with this project because the cost is much lower.