As older projects fill, executive suites developed
October 30, 2006
More executive suite space is coming on the market in the Reno area, but some developers question whether there’s enough demand to support all the tiny new offices.
Executive suites combine small offices generally, with room enough just for one worker with shared reception, conference and support facilities.
Managers of executive suites around town said in recent days that their properties are full, or nearly full.
The competition for tenants is likely to grow, however, as new projects come on line.
Templeton Development is leasing small office spaces in its Sun West Bank Building in the Mountain View Corporate Center at Kietzke Lane and Neil Road. The company also plans to develop another building in the office park as executive suites, says Kimberly Clark, who is marketing the projects.
Downtown, meanwhile, Basin Street Properties says it will remodel about 8,000 feet of the Bank of America Plaza at 50 W. Liberty St. into executive suites ranging from 100 to 280 square feet.
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“There’s a real demand for office space for Reno’s small business owners as many of the area’s executive suites are filled to capacity,” says Scott Stranzl, vice president of Basin Street.
While developers of existing projects acknowledge that vacancies are tightening, they feel some misgivings about the amount of new space that’s coming onto the market.
Jaffra Masad, developer of the 22-office South Meadows Executive Suites, says it’s taken a surprisingly long time to get tenants into her new project.
And Masad wonders if some executive-suite developers may light up at the thought of collecting rents that often are north of $5 a square foot without calculating the costs.
“What they don’t see is what they need to provide to get those rents,” she says.
Once the costs of a receptionist, top-quality telecommunications, shared kitchen and conference facilities and the like are backed out of the calculations, Masad says executive suites generate rents that are roughly the same as traditional office properties.
Robert Sader, who developed an 18-office executive suites project at 8600 Technology Way about two years ago, notes that executive suites sometimes come onto the market when developers of office buildings are unable to find tenants for larger spaces. Looking to generate some revenue, they create executive suites.
But he notes that successful offices suites are more than a simple subdivision of larger space.
“What you’re really selling is service,” Sader says. “The tenants want someone to answer the phone. They want a pleasant receptionist.”
Ian Kelley, who developed the Quail Executive Suites project at 675 Sierra Rose Drive five years ago, says executive suites also are challenging investments because relatively little space is available for lease to tenants.
At his 7,400-square-foot executive suites, for instance, the 23 tenants lease only 53 percent of the space. The remainder is devoted to reception areas, a conference room and an atrium featuring a waterfall and a large aquarium.
Another challenge, he says, is the turnover among clients. Because some of the one-person offices are startups, they either grow within a few years to a point where they need traditional space or decide to fold their tents. Either way, Kelley needs to find a new tenant.
But Kelley notes that his suites draw a diverse group of tenants, and that diversity provides some stability.
Among the tenants, he says, are out-of-town companies that want space for executives when they come to Reno. Another segment of the market, he says, are residents of Incline Village or other nearby communities who want a Reno office to conduct their business.
Executive suites typically target a niche, he said, and it’s rare that developers square off in head-to-head competition for tenants.
Brande Wood, who owns and manages the Downtown Executive Suites at 955 S. Virginia, notes that her project has been nearly always filled with a varied group of tenants for most of the past two decades. And that low vacancy rate, she says, doesn’t appear to be affected by new space that comes into the market.