Will Outdoor Terraces and Chefs Lure You Back to the Office? These Buildings Hope So.

Expensive air filtration systems to prevent the spread of Covid-19. Rooftop gardens irrigated by rainwater. A lunchtime menu from Michelin star chef Daniel Boulud.

Developers and the tenants that occupy big blocks of space across the U.S. are making expensive gambles on real estate perks designed for the uncertainties of the pandemic era, hoping the additions will be enough to lure reluctant employees back to the office and retain top talent in high demand. The changes offer hope to owners of trophy properties from New York to Seattle who feared disaster for their investments not that long ago.

The question now is whether their wagers will pay off. New Covid-19 variant Omicron is scrambling plans many companies had to welcome workers back in early 2022. Even before the variant emerged, more than 7 out of 10 American employees told pollsters they didn’t miss the office, and would welcome the chance to work at home permanently. Vacancy rates for office properties are still at or near record levels in many cities across the U.S., threatening to depress rents for years.

One place where this experiment is already under way is One Vanderbilt, a new 93-story skyscraper recently completed near Manhattan’s Grand Central Terminal that is taller than the

Empire State Building.

The developer, SL Green Realty Corp., outfitted the $3.3 billion space with high-end air filtration systems, a 4,000-square-foot terrace and a cafe with a menu overseen by Mr. Boulud.

A view of the new space at One Vanderbilt taken by Heidrick & Struggles, an executive search firm.

It is working so far. The tower’s 1.7 million square feet are now more than 90% leased after opening in September 2020. Asking rents for some of the remaining space are more than $300 a square foot, near record levels for U.S. office space. Initial tenants include investment giant Carlyle Group Inc., software company


and global executive search firm

Heidrick & Struggles.

Some of these companies are taking additional steps inside their spaces to make employees feel welcome, including separate spaces for quiet contemplation, video calls and even video games.

“Pre-pandemic the office was a place you had to come,” said Ashim Gupta, UiPath’s chief financial officer. “Post-pandemic, it’s a place we want people to have a purpose for coming.”

In Seattle, Selig Real Estate is converting the landmark Firestone Tire Building into a 220,000-square-foot, 15-story office building with solar panels, a rooftop garden irrigated by a rainwater recapture system and 195 bicycle stalls. In Detroit, Quicken Loans co-founder and property developer

Dan Gilbert

is upgrading the air filtration system planned for 400,000 square feet of office space rising at the site of the former Hudson’s department store. In Houston, giant office developer Hines is designing a number of planned new buildings so that tenants will be able to attach terraces to any floor.

“Commodity office is just something we’re not thinking about,” said Hines Chief Investment Officer David Steinbach. “That playbook is dead.”

Certain buildings have more advantages in this race to lure back companies and their workers. Where demand is strongest is for newer, top-shelf space in major markets throughout the U.S., according to landlords, brokers and tenants. The amount of space occupied in buildings constructed since 2015 is up 39.1 million square feet since the pandemic began, according to commercial real estate services firm JLL. Rents charged by the top 10% most expensive office buildings were 50% higher than the rest of the properties in their markets as of November, according to data firm VTS. Those premiums were 85% in New York and 68% in Los Angeles.

Even prime properties have no guarantees of success as most employees continue to work from home and the outbreak of the new Omicron Covid-19 variant threatens to push back some January return-to-work plans, just as the Delta variant upended scheduled office returns in September. And even when the worst of the pandemic is over, the shift at many firms to a hybrid workplace that combines office and remote options is likely to dampen demand for even high-end office space.

The advantage that elite buildings now have in their pursuit of top tenants is on full display at One Vanderbilt, a tower that stands out even in Manhattan. Its developer, SL Green, is New York’s largest office landlord but was known primarily for its acquisitions of existing properties before One Vanderbilt. It had never before attempted a new development on this scale.

It made the decision to be ambitious partly because it noticed the success that rival Related Cos. had luring midtown tenants to its trophy Hudson Yards project on Manhattan’s far west side. It also helped that the city in 2015 rezoned the site to allow the tower to rise to 1,401 feet, 150 feet taller than the Empire State Building. SL Green outfitted its tower with an entire floor dedicated to entertaining the building’s tenants and guests.

When the pandemic hit, One Vanderbilt was only about two thirds leased. Some of the tenants who had signed leases decided to give up some of their space as they made adjustments to their real estate strategies. Law firm Greenberg Traurig, for one, decided to give up one of its four floors as it moved to a “hub and spoke” approach in which the main offices in the SL Green tower are supplemented by four satellite sites near employees’ homes in the New York region.

But Carlyle, another tenant in the building, was happy to take the space at no cost to the law firm, much to the relief of Greenberg Traurig vice chairman Robert Ivanhoe. “I was sweating bullets,” he said.

Strong demand for the tower’s space also convinced financial firm Nearwater Capital to sign a new lease early this year after pausing its negotiations for the 33rd floor in March 2020. Managing partner James Peterson said he resumed negotiations with the landlord roughly eight months after a lockdown sent employees home, believing that he held all the bargaining power and that the owner would have to cut its price.

Instead, Mr. Peterson said, “you could feel the market come back. I didn’t want to be on the wrong side of it.”

Some One Vanderbilt tenants say they are seeing more workers coming into the office now that they are in the new, amenity-rich building. One is Greenberg Traurig, where roughly 50% of the workers are showing up as compared with less than 20% before the move took place, according to Mr. Ivanhoe. One Vanderbilt, he said, gives those who now work from satellite locations a greater incentive to meet with staff in the main Manhattan office.

The firm’s old space “looked like you were going back in a time capsule,” he said. “Everyone wants to come in” and work in the new space.

Heidrick & Struggles moved into its new offices in mid-November. Roughly three times more employees are coming to work now that the space is available to them, according to the firm’s chief financial officer.

At Heidrick & Struggles—which leased 35,000 square feet at the end of 2020 and took occupancy of its full floor in mid November—roughly three times more employees are now coming to work, according to chief financial officer

Mark Harris.

It has roughly half the amount of space when compared with its old location because it adopted a hybrid strategy that now allows employees more time to work remotely.

On the day the offices opened practically everyone who worked in the building showed up to check it out, Mr. Harris said. Some brought along family and friends who wanted to see.

“We ran out of space a little bit,” Mr. Harris said.

UiPath isn’t in One Vanderbilt quite yet; it plans to occupy its 26,000 square feet office starting next fall. There will be a game room with ping pong, foosball and videogames. There will also be a new physical layout for its people. Instead of jobs determining where people sit—such as sales and marketing—the office will be organized by technology needs.

For example, one area will be devoted to tech used to interact with clients and the outside world with video calling and other forms of high-tech interaction. Another area will be an area with a “library atmosphere,” Mr. Gupta, the CFO, said.

“It’s a quiet place to work if you need to get away from the screaming kids at home.”

Write to Peter Grant at peter.grant@wsj.com

Corrections & Amplifications
Heidrick & Struggles moved into its new offices in mid-November. A caption in an earlier version of this article misspelled the name of the company. (Corrected on Dec. 10)

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