Why The Smartest Money in Commercial Real Estate Now Pays Double for Office Space.
Written by Tim Schaffer, President
Why would any company pay $65 per square foot when the building next door is $35? Because the more expensive space could actually make the company more money. Not because the lobby is nicer, but because the building measurably raises the output of the people inside it, and those people cost roughly ten times what the company pays in rent.
1% ENERGY | 9% RENT | 90% PEOPLE
That ratio is the whole argument. A typical business spends approximately 1% of its office costs on energy, 9% on rent and 90% on people. The World Green Building Council established it; JLL confirms it.
Yet our entire industry markets to the 9% and ignores the 90%. We sell cost per square foot to buyers whose real expense, by a factor of ten, is the productivity of their own people.
THE PERFORMANCE BUILDING
Sports solved this a generation ago. No franchise builds a training facility and simply hopes its athletes perform. The building is engineered backward from human performance, with air, light, acoustics and recovery treated as competitive infrastructure, not amenities.
The office is the same instrument aimed at a different athlete.
I call it the Performance Building: an office engineered the way a stadium is, to optimize the people inside.
THIS IS NOT THEORY
Jamie Dimon spent $3 billion in New York at 270 Park Avenue, incorporating twice the required fresh air and design principles informed by Harvard’s research on air quality and cognition.
Karbank Real Estate has been quietly building it in Kansas City for more than a decade, commanding some of the market’s highest office rents and pre-leasing a new ground-up building (1957 Shawnee Mission Parkway) at rates that double conventional Class A space.
WHO WILL MOVE FIRST?
Here is what most of the industry misses: the math is invisible to whoever runs corporate real estate because a facilities manager measures rent per square foot—not revenue per employee. That number lives with the CEO.
The first movers will not necessarily be the Fortune 500. They will be companies where the person signing the lease is also responsible for the bottom line, and has the confidence to bet on their own people.
The full argument- the biology, the math, and the essential components of a Performance Building is linked here.