Marketing centers for build-it-but-before-they-come

Real Estate Weekly, May 30, 2001 by Natalie Keith

With the economy slowing and many companies putting real estate decisions on the back burner, some developers of new office buildings are building elaborate marketing centers to woo prospective tenants. In recent months, Louis Dreyfus Property Group opened a 1,500 SF center in Stamford, Conn., and the Garden State- Hi-Tech Park LLC has opened a 2,500 SF center in Neptune, N.J. where clients can view large-scale models of proposed buildings and watch videos with detailed descriptions of amenities offered to building tenants.

"In the past the market was strong, so a lot of companies got away with just sending brochures," said Jerry Richter, principal and director of marketing for Garden State Hi-Tech Park LLC. "They thought the tenants would just come."

The centers are designed to be interactive, with much more for the prospective tenant to see, touch, and hear than a traditional marketing brochure would offer. Office developers say the extra effort is needed to convince companies who may be reluctant to sign on the dotted line during an uncertain economic climate. Unlike past real estate environments where speculative building was the norm, developers typically need lease commitments for at least 50 percent of a building to receive financing.

Louis Dreyfus is planning to construct a 574,000 SF building in Stamford, Conn., called Connecticut Place, which will overlook Interstate 95. Garden State is planning a corporate and technology center that will contain 19 buildings and four million SF of space when completed. Both developers are planning to begin construction during the summer months and both companies have been working diligently to attract tenants.

The Connecticut Place marketing center is about 1,500 SF and is located on Richmond Hill Avenue across the street from a vacant lot where the building will be constructed. It was built with the same materials that will be used in the tower and designed to simulate views from the 23rd floor. The south wall has samples of the windows that will be used, with enlarged, panoramic photographs of the "views" from the window. The pictures were taken from a helicopter as it hovered above the building site, said David Friedman, Louis Dreyfus' northeast regional vice president.

"You have to show people how you're visualizing things. People have to be able to see it," Friedman said. "This is as close as we could get without actually constructing the building."

Among reasons for building the 2,500 SF marketing center for the Garden State project was to demonstrate the technology that will be offered in the building. When the first building is constructed, the marketing center will be moved there.

"It's really necessary to go the extra mile with a long-term project," Richter said. "You have to provide reasons for tenants to want to move here."

Real estate consultant Peter Pattison, principal of Peter Pattison Ltd., said marketing centers were not prevalent until the late 1970's and early 1980's when companies like Olympia New York and Hines Interest decided to construct them. At the time, centers typically cost about $500,000. By comparison, printing marketing brochures cost about $50,000 to $100,000.

"[The Hines Interest center] was a series of walkthroughs for different spaces. It was more like a sound and light show," Pattison said. "It's a pretty powerful marketing tool."

In recent years, however, developers are less likely to build marketing centers, partly because they do not build speculative buildings anymore, he said.

For Connecticut Place, construction of the marketing center helps to convince prospective tenants that Louis Dreyfus is serious about moving forward with the project. To build confidence, the company also tore down an income producing, 9-story office building on the site.

In places like Stamford, it is not uncommon for developers to receive city approval for a project but face long delays before beginning construction because of the difficulty in getting tenants. Hines Interest received approval in 1997 for a downtown office project a few blocks from the Louis Dreyfus planned tower, but is still looking for tenants.

John Goodkind, principal/executive managing director of Newmark & Company Real Estate, said he frequently meets with clients at the center, which makes his job as the leasing agent for the project easier. He added that he has never worked on a project with as elaborate a marketing center as this one.

"This is a dream launching pad as far as getting people to believe in the project," he said.