The NFL has certainly figured out how to create demand. Despite the lock out that threatened the season this summer, the NFL had a great season is expecting a record viewing audience for the upcoming Super Bowl (Go Giants!). The Super Bowl is truly the ultimate event. Not only are tickets in heavy demand, even in Indianapolis, but tickets to the surrounding parties are hot commodities as well. Tickets for the game start at $900 per ticket (face value) and the average on the secondary market is over $3,000. A-list performers line up for the opportunity to sing at halftime (Madonna this year) or the national anthem while other celebrities travel in from all over to be a part of the big game.
Non-football fans are happy to watch for the commercials which are fetching record rates at an average of $3.5m for a 30-second spot with prices topping out at $4m. Advertisers develop special ads and campaigns centered around the Super Bowl, making everything about the game and the experience special.
Landlords throughout the market are trying to figure out how to create similar demand for their vacant offices spaces. While they can't get Madonna to sing at their buildings, some have added features and amenities to lure tenants. And it's working. We are hearing the term "Flight To Quality" more and more.
Playing offense, some landlords have reinvested in their buildings, added amenities such as fitness centers, common conference rooms, renovated cafeterias and lobbies, and have actively tried to deliver a better tenant experience. Some have even built new buildings or renovated older buildings. With the compression on rents, tenants are willing to pay more, albeit still in line with the market, to be in better buildings.
For example, Metropolitan Center in East Rutherford, is a top of the market building directly across the street from Giants Stadium, and is outperforming the market significantly. They are doing so because they created a unique amenity package, including a covered parking, fitness center, training room with video conferencing capabilities, and a shuttle available for tenant use. They are hyper focused on the overall tenant experience, giving tenants something they couldn't get elsewhere in the market.
Another example is 101 Wood Avenue South in MetroPark. They signed over 100,000 sf in leases last year after completing a renovation of the building entrance, amenities, and common areas. Was this by coincidence? I think not. Our team has recently completed three deals totaling over 150,000 sf at Two Tower Center in East Brunswick, which has one of the strongest amenity packages in Central New Jersey.
Similarly, institutional investors are seeking high quality assets in better submarkets. Record prices have been recently achieved in Jersey City at 90 Hudson and 525 Washington and 333 Thornall Street in MetroPark had many suitors before finally being sold to TA Associates in late 2010. Core assets and bargain basement values are the two segments with high activity in the capital markets sector, but the Class A buildings have a deeper investor pool.
Real estate investors can't create the demand of the Super Bowl. But by creating a top of the market tenant experience, they will capture tenants in the short-term and allow rents to grow at a faster rate when the economy improves. Ticket prices for the first Super Bowl were $12. I guess they should have had The Beatles play the halftime show instead of American trumpeter Al Hirt and two marching bands. They could have gotten at least $20.