Mention a turnkey sublease, and “unique” and “branded” are not typically the first descriptors that come to mind. Efficient? Yes. Cost-effective? Sure. But in this issue’s End User column, the team responsible for Sunrun’s fresh new Denver space demonstrates that with a strategic approach, a lot of creativity and flexibility – and a bit of psychology – you really can have it all.
The Experts:
Cullen McGuire, Project Executive – Rand Construction
Shawn Murphy, Senior Director of Real Estate – Sunrun
Richard Smith, Principal – IA Interior Architects
Megan Walsh, LEED AP BD+C, Principal – Catalyst Planning Group
QUESTION: How was Sunrun able to uniquely brand a turnkey sublease with a tenant improvement project in a previous company’s built environment?
Shawn Murphy
Sunrun
Shawn Murphy: Our initial exploration was, “As Sunrun, how do we really work?” From there, it naturally fell into place and became more of a “refresh.” Through new paint, modified furnishings, carpet and branding – the space went from prescribed to personalized.
Richard Smith: To make the space unique for Sunrun, we reimagined it and removed all of the previous client’s branding, including the red carpet tiles, wall color and seat cushions, which reflected the previous occupant’s logo color. We put in blue to represent Sunrun’s logo and brand.
Megan Walsh: There is a new norm for increased headcount and density. Was there a disparity between that and what the existing space offered?
SM: We inherited the space and its nuances, good, bad or indifferent. It’s the nature of the industry, too – as a renewable utility, we’re a little scrappier now – but we see continued long-term growth.
Megan Walsh
Catalyst Planning Group
MW: A more typical solution for moving employees into an existing space might have been benching as a workplace solution. Why did you take on a more traditional workstation environment instead?
SM: Everywhere else, we’re benching with approximately 30 square feet for each employee to sit or stand. However, the cost to implement that would have tripled versus using the existing system already in place at the sublease. Plus, the HVAC and MEP systems couldn’t have handled the density, so we were constrained by that engineering metric, as well.
MW: “Refresh” really is a good way to describe this, as a lot of the project was not actually construction per se. Many nonconstruction work streams were given minor updates or simply reused, like repurposing the existing Herman Miller components of the workstations, but making them more trend-forward by incorporating glass panels and lighter materials.
Richard Smith
IA Interior Architects
RS: There was a lot of reuse, which ties into Sunrun’s environmental approach. Given their renewable energy business platform, sustainability was a grounding point for the project.
SM: Yes, it’s definitely part of our business model as well as our core culture.
QUESTION: What were some of the priorities in Sunrun’s sublease project and how were those implemented into the overall project?
MW: You’ve said that Sunrun’s shared values informed the finished space. How so?
SM: Well, the project’s extensive reuse of materials reflects our environmental values – but we applied other corporate values, too, like adaptability and being inventive.
Plus, we have a lot of millennial workers and they are accustomed to amenities such as phone rooms, huddle zones and community areas. We created both social zones and collaboration areas. It’s great because now I see groups simply rolling their chairs together and meeting.
As added pressure, this was our first rollout and pilot project. While this project was going on, Sunrun had 20 concurrent builds either happening or planned across the U.S. This sublease helped us define the standards for the others. We were forced to ask ourselves tough questions about how we worked and what our work environment should be. These questions, and the resultant answers, informed our new environment.
MW: Given that this was a phased occupancy, we essentially had an occupied renovation project on our hands. How did this impact the construction work from a general contractor’s perspective given that you had three teams to report to – the landlord, the sublease entity and Sunrun themselves ?
Cullen McGuire
Rand Construction
Cullen McGuire: We were working in an occupied, finished space 100 percent of the project’s duration, plus the open stairs were an added coordination point. Since it was already a finished space, Sunrun started moving in on Day 1. You have to be very clear about the true existing conditions and have a very clear scope of work. You also have to ensure safety first and deliver a clear phasing plan to accommodate those working within the space, while still complying with building rules and regulations. It takes a lot of careful planning and tight communication.
MW: I watched this project take shape and appreciated your consultative approach. In a lot of ways, construction was the easy part. By layering and sequencing the project schedule, you outsmarted the existing conditions from a cost and schedule perspective.
CM: Developing a comprehensive price for a complete build-out is easy in comparison, but we estimate that by working around what was here, we saved about 80 percent of the construction cost.
MW: As a sublease, you clearly want to modify only what is needed and capitalize on the plug-and-play mentality of what exists. How did you craft the sublease from a brokerage perspective to best spend the dollars available as tenant improvement monies?
SM: From a previous project and a past CRE life, I had prior knowledge and perspective of this space and its profile. I knew the economics, so we were able to secure a rate that was 25 percent under market and, by avoiding a full build-out, we mitigated the capital costs by reusing furnishings and finishes.
RS: We focused on recalibrating low-cost but very visible aspects of the design to create maximum impact, while being responsible to spend.
SM: All from red to the Sunrun blue!
QUESTION: What have you found are some of the biggest advantages and disadvantages of working with a turnkey sublease?
SM: The greatest success for us has been, pure and simple, the economics of the turnkey sublease and the speed to market. We were also strategic about making sure our growth plans really dovetailed with the previous tenant and the building. Strategic growth strategy within the Sunrun real estate portfolio and the 1515 Arapahoe towers was pivotal.
Of course, we learned a couple lessons. The density and agility of the finished space isn’t perfect. For example, Sunrun employees have “self-adjusted” the workspace by removing some of the workstation panels themselves to better accommodate collaboration. We also had to install sound masking since it’s such an open space, but that has been really effective.
MW: Instead of densified, I’d describe the space as “optimized.” Would you agree?
SM: Yes, we definitely optimized the use of space versus just densifying it. We did not include any private offices, which other locations are prescribed for “director” level and above. Instead, we gave that space to all the employees as shared amenity-rich space. Also, we optimized our use of the building’s amenities, like the first-floor meetings rooms and exterior space.
MW: You didn’t have to re-craft the space technology-wise and all infrastructure was in place. How strongly did that factor into your site selection strategy?
SM: We literally maintained all the technology; it was “plug and play” and was very impactful in our space selection criteria.
RS: It was a big advantage since employees were able to move in post-haste and go live on Day One.
QUESTION: What are some specific characteristics of this project as a sublease versus a traditional TI project?
RS: One aspect was that the office and conference room spaces were already prescribed, so we had to balance what was already here with the Sunrun’s program and needs. It helped to have such an educated client!
SM: We had limited choices, so we had to be purposeful in our criteria for success and resultant decisions to support that goal.
In addition, the speed to market was unique and definitely an advantage. It completely facilitated our ability to ramp up and become operational.
MW: Which really mitigated the impact of the project on your corporate bottom line. You already have 315 people producing revenue!
SM: Another advantage is that it’s a three-year term with an option to renew. So it’s only three years on the balance sheet, which is great for our financial health. A sublease gives us great flexibility, not just in terms of scaling or size, but also with the terms. Since we were first in the door on this space, we were given a lot of consideration – for example, we have first right of refusal on future space that comes available.
MW: There is a lot of psychology involved, as well as strategy.
SM: Definitely.
QUESTION: How is the design and construction industry responding to subleases, given the high turnover of space in the market and the “new normal” of settling into a former company’s space?
CM: Refreshes like this one are becoming more common. As various market segments continue to experience fluctuation, I think we’ll see more turnkey subleases. They can make a lot of sense.
RS: Yes, and adaptability and being inventive become key advantages.
SM: We had a lot of advantages, with the existing utilities, the technology, the existing furniture, etc., but you also have to be very creative and nimble. Which, thankfully, are two of our corporate values, as is being “customer-obsessed.” Together, as a project team, we accomplished that value for our end users! \\
