The recent rise in the demand for premium office amenities, workplace experiences, and cutting-edge smart building design is often attributed to CRE requirements from TAMI tenants – businesses in the technology, advertising, media, and information industries. TAMI tenants are getting a lot of attention from landlords and brokers these days because in the past 5-10 years, they've given FIRE tenants – businesses in the financial, insurance, and real estate industries – a run for their money with regards to leasing demand.
For instance, in examining leasing demand in Manhattan for the second half of 2017, Commercial Observer reported that of the 372 tenants looking for space at the time, TAMI and FIRE dominated the demand landscape. Combined, TAMI and FIRE made up 49.2% of the tenants looking for space and 45% of the square feet required.
Because of this, CRE professionals see the writing on the wall – they can no longer ignore the STEM and creative industries as they begin to encroach on leasing demand from the old reliable FIRE tenants with their long term leases and strong credit.
But in that same Commercial Observer article, it was reported that the average size of financial tenant requirements was 78,060 square feet, due to 13 tenants searching for 100,000-plus square feet. But only five TAMI tenants were looking for greater than 100,000-square-foot spaces, equalling only a 43,659-square-foot average. While this is only a sample of a small time period in one city, it's indicative of a larger trend, and proof that CRE is not, and should not, disregard FIRE tenant demands any time soon (or ever).
So, how different are the workplace expectations from these two sets of industies? Is the demand for amenities really just a tech thing?
Now, TAMI businesses didn't whip up these expectations out of nowhere. The concept of the future of work is really a perfect storm of many trends coming together and playing off one another – tech sector growth particularly in Silicon Valley, mobile phone adoption, an increase in millennials and digital natives in the workforce, the gig economy and coworking, increased value placed on user experiences over physical assets, the WeWork effect, and of course, the war for talent in all sectors, but particularly in the TAMI industries.
As a result, leading TAMI companies began leveraging their office environment as a leg up on other businesses battling for the best engineers, product managers, designers, marketers, and so on. Additionally, TAMI businesses quickly realized the impact that these state of the art offices had on their business as it inspired and energized professionals and further blurred the lines between life and work.
But, as we mentioned in the last post in our Amenity War series, these expectations and demands are spreading far and wide as other industries take note of the effect it has on employee happiness, productivity, and loyalty – particularly with the millennial generation who is on track to dominate 75% of the workforce by 2025.
Wouldn't the up and coming generation of financial, insurance, real estate, and law professionals want these same workplace benefits and experiences? It seems to be changing, and fast. This, according to a recent report from Gensler Research, is indicative of this change:
"Current law firm design is based on a model that has been around for almost 100 years. The allocation of space comes from a mentality that legal work is individual and that the private office is a symbol of status and success. Yet legal work and legal culture are changing rapidly. New economic realities, new technologies and ways of working, global talent, and client pressures are colliding with a new suite of expectations and work styles from young attorneys. Law firms are now pat of a value-based economy and need to reinvent how they operate and how they use space."
A good example of this shift is right in our backyard in the Seaport neighborhood of Boston. Years ago it was designated as the Innovation District, a place where fledgling startups flocked to cheap rents in undeveloped loft space and old warehouses. This campaign, a huge initiative for Mayor Menino and his administration, invested in the idea of economic growth from entrepreneurship and began to design the Innovation District with that user in mind. As developers began executing on that vision, and given its otherwise untouched proximity and views of beautiful Boston Harbor, rents began to rise, pushing out many of the startups and inviting in the PwCs, Goodwin Procters, and State Streets of the world.
In the next week or so we'll be looking much more closely at the Seaport neighborhood – who makes it up exactly and what it has to offer to professionals working there (hint: LOTS! ). The newest, most well designed, and premium Class A office space in the area call some of the biggest FIRE businesses their tenants. Sure, there are certainly some larger tech companies mixed in there – LogMeIn, Red Hat, FitBit, and others – but it's the FIRE businesses for the most part who have moved in and capitalized on some of the best office space in the city.
The bottom line is that the future of work for ALL industries is this tech-enabled, amenity-driven workplace experience. For FIRE and TAMI industries, every professional will be connected tenants – and these tenants want concierce style services, they want access to health and wellness activities, they want easier commutes and proximity to city centers, and they want user experiences and tech-enabled perks.
The landlords that design all workplace experiences with this in mind, regardless of industry of tenant occupancy, will see longterm success as CRE continues to transform from a business of renting space, to a user experience business.