Virtual Spec Suites Promote Safety and ROI
by LCP360, on Dec 1, 2020 9:00:00 AM
Speculative suites, or “spec suites,” have become the “model home” in commercial office space. These marketing tools were designed to entice a broad array of potential office tenants into signing a lease.
Spec suites, however, can cost hundreds of thousands of dollars to build out. On top of the ever-challenging struggle to keep spec suite costs down, the coronavirus pandemic of 2020 has turned the office industry on its head.
While it’s expected that workers will eventually return to physical co-working spaces, tenants will still be weary of touring available office space in person. Even without coronavirus, tenants these days don’t have the time or capacity to tour several offices in one day.
So the question remains, are traditional speculative suites worth the investment if it means that less people see them in person?
The answer is pretty clear. The thousands of dollars may not be worth it, but spec suites still hold the same value: people need to see what a bare bones layout can look like with the walls raised, flooring put in and furniture.
However, the coronavirus pandemic has thrown a lot of curveballs our way this year, and commercial office is one of the main industries seeing these big changes.
Speculative Suites Aren’t What They Used to Be
While fancy glass high-rise buildings have been known to somewhat sell themselves, speculative suites are still a powerful marketing tool in the commercial office industry.
When a tenant sees a fully or semi-move-in ready space, that can be a huge selling point. So why not spend the thousands of dollars to build and furnish a space if it means securing a 15-year lease with a tenant? There are few concerning factors:
- A landlord can expect to pay anywhere from $50 to $150 per square foot to build out an entire spec suite. Some spec suites are 1,000 square feet, while others are 5,000 square feet. Some are even as large as 10,000 square feet in major metropolitan areas. If we do the math, we’re looking at a $50,000 investment on the low-end, or a $500,000 investment on the high-end.
- Speculative suites are almost always renovated or wiped at the request of a new tenant. So you’ve put all this money and energy into building out a spec suite to market available space, only to make more changes later. This results in more costs, delays and time lost when a tenant could have moved in immediately. Or, you could have spent the time building out a space that is perfect for the tenant.
- Less people want to risk touring new office spaces in person due to COVID-19, so it seems debatable to spend that kind of money on a space for it to go unseen. Sure, you could argue photography can come into play, but that’s an added cost to the spec suite budget.
- Similarly, the "trendy" office layout is always changing. Now more than ever, it’s changing rapidly. Spec suites used to cater to the trend of open floor plans, but cubicles and closed-off spaces are making a comeback. Changing out physical spec suites to meet current trends is cumbersome and costly.
Spec suites simply aren’t what they used to be, and the year 2020 has only added to these challenges.
The problem: tenants still want to “visualize” themselves in their new office space. How do we do that digitally but in a cost effective way?
Let’s Talk Virtual Staging for Commercial Office
Virtual staging has become a popular, budget-friendly solution in recent years, especially in multifamily, but has just recently become an item of discussion in commercial real estate. That’s simply because the benefits are too good to be ignored:
- Virtual staging offers different types of media: still images and 360° content. This means landlords can showcase available spaces with simple photographs or interactive experiences (virtual tours) with virtual staging (or, digital spec suites).
- With less people wanting to leave home or gather in person, you can offer a digital spec suite experience instead of one that is physical, thus sharing a safer alternative to touring the available space.
- Virtual staging looks like the real thing. High-quality, photorealistic renderings can mirror 100% of what a built-out spec suite would look like, so you’re not losing out on the value of the marketing tool.
Let’s talk about the biggest factor of them all: ROI.
For quality virtual staging, you can expect to spend a maximum of $500 for a virtual staging image. For 360° content, that will likely run you anywhere from $500-$700 per 360° panorama.
These costs are dependent on scope and quality, but if we factor in the need for 5 panoramas to create an interactive walk-through experience of a spec suite, that’s going to cost $2,500. Compare that to what a physical spec suite costs ($50,000-$500,000).
That kind of return on investment simply can’t be ignored. And today, there is even more of a reason to go digital with your spec suites:
- Future tenants are busy and aren’t always available to tour six office spaces in one day. Giving them the opportunity to tour virtually with a built-out spec suit can help reduce research time and pre-qualify tenants.
- With virtual staging, you can show what an office space looks like in a bare-bones state, and what it looks like as a speculative suite.
- Virtual spec suites present the opportunity to build out what a tenant may be interested in for their own office layout, so they can see it before construction.
- Most tenants are apprehensive about in-person contact, so these kinds of virtual tours are solving that.
- With a pullback on commercial office spaces, virtual staging is the answer to budget and ROI concerns.
Virtual Spec Suites in Action
It works by taking a standard high-quality image (or 360° image) and placing rendered elements and furniture on top to create a totally new space.
Architectural designers use renderings to map out what a space will look like when it’s complete, and this same process is used, but instead with photography.
The New Spec Suite Alternative is Here to Stay
If you are still building out physical office spec suites during the coronavirus pandemic, we recommend re-evaluating the costs and return. Already, office landlords are turning to these digital alternatives for the ROI benefits and safety precautions.
Stay ahead of the curve with virtual spec suites. Talk with our team today to learn more about virtual staging solutions for your commercial office space.