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1 CBRE GLOBAL INVESTORS LEARNING FROM ATLANTA: WHAT PROFESSIONAL SERVICES FIRMS NEED TO KNOW ABOUT OFFICE SITE SELECTION Service professionals across an array of industries today are wrestling with a generational shift that is changing the way they work and use office space. It began in the 1990s, when Generation X (born ) began to question previously accepted notions about the workplace and increasingly rejected long commutes from the suburbs and rigid 9-5 hours. This is the generation that ushered in telecommuting, embraced shared workstations and demanded flexible hours that provided a better balance of work and family life. Office spaces leased in the years leading up GENX to the 2008 recession reflect ( ) many of these practices moving into the mainstream. In a post-recessionary world, a combination of cost consciousness and the arrival of Generation Y (born ) has triggered further upheaval at the nation s law offices, More tech savvy than Baby Boomers accounting firms and other professional shops. Firms competing to hire and retain recent college graduates must meet the new generation s expectations Balance work and for family- living want and more working flexible hours in a vibrant urban environment, one that supports constant More connectivity interested in urban via social living,close media to workand handheld devices as well as open communication and collaboration in the workplace. Employers are wooing these young professionals by locating in trendy urban centers that offer a stimulating mix of residential options, shopping and entertainment in a walkable landscape. At work, new office layouts allow these employees to organize in project teams and then move on to other groups when the task at hand is done. The employers that fail to accommodate these new work preferences risk difficulty hiring and retaining the best talent. APRIL 2014 Executive Summary Page 1 Case Study: Smith & Howard PC Page 3 The Layout: Form Follows Function Page 4 Top 10 Site Search Considerations For Professional Service Firms Page 5 GENX ( ) More tech savvy than Baby Boomers Balance work and family- want more flexible hours More interested in urban living,close to work GENY ( ) Even more tech savvy but fewer are driving More environmentally conscious Team oriented and want increased mobility, flexibility and efficiency Professional service firms more than ever are focused on what s important to their employees rather than what their executives want, says Jeff Keppen, a senior vice president at CBRE, the world s largest commercial real estate services and investment company. In the past, you would see firms making real estate decisions based on convenience for the GENY C-level executives, choosing locations close to the part of town where executives live and close to the best schools, ( ) Keppen explains. Now, firms have to think about what kind of employees they are trying to hire, and what those employees want. The shift has benefited in-town markets like Atlantic Station, which has a truly walkable aspect to it. Even Keppen more tech markets savvy but office fewer properties are driving for lease at Atlantic Station, an urban mixed-use development More in Midtown environmentally Atlanta, conscious behalf of its owner, CBRE Global Investors. Almost every prospect we Team see oriented here is and concerned want increased with mobility, attracting flexibility and retaining talent, Keppen says, and for many of them, that is their main objective in choosing a space. and efficiency

2 At the same time, leaders can t afford to make workspace changes that don t further the company s revenue-making potential. That s why every site search should begin with a needs assessment that identifies specific areas for improvement and then proceed with a strategy that will capitalize on those opportunities. It s never easy to decide where you want to put your company, says veteran office tenant representative Kirk Diamond, a principal in the Atlanta office of Cassidy Turley Commercial Real Estate Services. Workplace strategy is critical to decisionmaking with professional service firms. It allows them to use space more efficiently and lease less space per person. This report takes a look at one Atlanta firm s recent selfassessment of its office requirements, follows its search for space and explores some of the concepts it adopted in its new workspace. Then we queried Atlanta experts and distilled their input on site search considerations down to 10 key points that every decision maker at a professional service firm should consider before embarking upon a search for new office space. PROFESSIONAL SERVICES CONVERGE IN MIDTOWN AND ATLANTA S CENTRAL SUBMARKETS Even before the close of the 20th century, Midtown Atlanta was emerging as the preferred submarket for the region s professional service firms to call home. As its name suggests, Midtown bridges a geographical divide, stretching from the staid and traditional office towers of Downtown Atlanta to the affluent, retail-rich shopping malls and upscale residences springing up in Buckhead. Serving collectively as Atlanta s central business district (CBD), these three neighborhoods grew their headcount of professional service workers by nearly 17 percent over the past decade. Of the 3,557 professional service jobs created in or moved to the CBD from other markets or submarkets, a whopping 66 percent or 2,365 went to Midtown, the researchers found. Professionals take up more than 28 percent of the occupied office space in downtown Atlanta, and in Midtown that concentration increases to 38 percent. PROFESSIONAL SERVICES OCCUPANCY BY SUBMARKET 38.2% 28.3% 20.1% MIDTOWN DOWNTOWN BUCKHEAD Professional Service Firms in Atlanta 64,999,707 SF Professional Service Firms in CBD 10,302,138 SF 62% of all Professional Services Firms are in Downtown, Midtown or Buckhead Downtown 19.8% 7.8% 3.3% 68.9% Midtown 5.8% 1.9% 6.1% 86.5% 12.8% Buckhead 9.7% 27.8% 49.6% Law Firms Accountants Engineers/Architects Real Estate 2 CBRE GLOBAL INVESTORS

3 Another submarket with a high concentration of professional service workers is the Central Perimeter, which had 3,775 jobs in that category in 2011, representing more than 12 percent of its total employment. Yet Midtown stands as the strongest submarket by far for professional service, with a sector job count of 15,747 in 2011 compared to downtown s 4,846. Clearly Midtown, downtown, the Central Perimeter and Buckhead dominate that professional service category, but Midtown is a hotbed for professional service firms and the numbers bear that out, observes Dan Wagner, CBRE s regional research manager in Atlanta. Some of that pronounced employment growth has occurred organically at law firms and other service companies already established in downtown or in Midtown. One of the businesses that elected to stay in Midtown is Paul, Hastings, Janofsky & Walker. When its lease at Bank of America Tower expired in 2012, the law firm moved to the Proscenium building at 1170 Peachtree Street, another Midtown address. But much of the recent surge, into Midtown in particular, stems from employers that have moved from other submarkets to become part of Midtown s hip urban community. Law firm Fisher & Phillips, for example, in 2010 moved its national headquarters from Buckhead to 1075 Peachtree Street, a Midtown office tower. The Atlanta office of King & Spalding, an international law firm, made a similar decision a few years earlier, moving its 1,000 attorneys and support staff in 2006 from downtown to the 1180 Peachtree building in Midtown. Attorneys aren t the only professionals gravitating to Midtown, either. The Atlanta office of marketing powerhouse Ogilvy & Mather consolidated Atlanta operations from Roswell and Buckhead when it opened its Atlantic Station office last year. Likewise, public relations firm Edelman left downtown Atlanta to open a Midtown office in 1075 Peachtree Street early in And in 2012, global sports and media company IMG Worldwide consolidated its Buckhead and Interstate North offices into approximately 35,000 square feet at 1075 Peachtree St. NE in Midtown. CASE STUDY: SMITH & HOWARD PC MIDTOWN ACCOUNTING FIRM BOOSTS FUNCTIONALITY, AMENITIES WITH SHORT MOVE Smith & Howard PC once occupied its own three-story Midtown Atlanta office building, but the accounting firm moved to lease space amid the office, retail and entertainment venues at Atlantic Station in November The No. 1 reason we decided to move was for recruiting purposes, to help compete against the Big 4 accounting firms, recalls Tim Agnew, a partner at Smith & Howard. Then and now, most of the young college graduates the firm was hiring preferred hip urban locations over an office in the suburbs, and Atlantic Station combined that Midtown vibe with excellent highway access and area amenities. By 2012, Smith & Howard s space was falling out of step with the way its employees wanted to work. The break room was inadequate to seat employees on busy days when the management brought in meals for the staff. The combination conference and training room lacked natural lighting and wasn t large enough to accommodate company-wide gatherings comfortably. Employees could interact easily enough from one cubicle to another, but wanted someplace to make the occasional personal phone call to their doctor or to conduct a confidential conversation with a client. A pending lease expiration provided Smith & Howard with the perfect opportunity to tackle the company s real estate challenges systematically. With a year remaining on the lease, Agnew and other stakeholders formed a committee to review space requirements and explore building options. The team wanted a better layout that would reduce operating costs through greater efficiency. Equally if not more important, it wanted to offer employees a set of amenities that would make the workday more enjoyable, perhaps enhancing their lives outside the office as well. Having clients throughout the Atlanta metropolitan area, the team quickly narrowed its search to centrally located properties with convenient highway access that made it easy for clients and employees alike to reach the office. We knew we wanted to stay in Midtown, says John Lucht, Smith & Howard s managing partner. At Atlantic Station, the firm was already moments away from State Highway 401 and Interstates 75 and 85. THE NO. 1 REASON WE DECIDED TO MOVE WAS FOR RECRUITING PURPOSES, TO HELP COMPETE AGAINST THE BIG 4 ACCOUNTING FIRMS Tim Agnew, Smith & Howard partner But parking in much of Midtown proved to be a significant challenge. Most office properties in the area offered two vehicle spaces per 1,000 square feet of leased offices and required a walk to offsite lots or garages to meet any additional parking needs. We didn t want employees to have to walk through downtown Atlanta at 11 o clock at night to offsite parking, Lucht says, adding that employees frequently work long hours around tax deadlines. Security was an issue. Smith & Howard s decision to move into th Street, an Atlantic Station office tower, eased those fears, thanks to Atlantic Station s excess of available parking and extensive security measures. A security command center monitors activity on the parking deck and other public areas via more than 600 cameras placed throughout the property, while a private security force patrols the development around the clock. Another must-have feature was high-quality amenities near the office. Employees liked having retail options within walking distance, eliminating drive time to run errands or meet for lunch at a nearby restaurant. For professional services, time is money and the accessibility factor is a huge time saver, Lucht explains. During the holiday season, it s very easy to A SERVICE PROFESSIONAL S PRIMER ON OFFICE SITE SELECTION 3

4 shop at Atlantic Station without having to drive somewhere else. Two Midtown neighborhoods along Peachtree Street and at Atlantic Station provided that desired level of retail and restaurants. Peachtree Street from 11th [northward] is competitive in terms of amenities, but it s much harder to get access from Peachtree to the freeways, Agnew says. Having narrowed the search to specific properties in Atlantic Station, the selection team compared available floor plates and possible office configurations. The company ultimately elected to move to th Street, a highly efficient (LEED Gold Certified) office building owned and managed by CBRE Global Investors Strategic Partners U.S. and located just a block away from Smith & Howard s current offices. THE LAYOUT: FORM FOLLOWS FUNCTION Smith & Howard s short move brings with it a substantial amenities enhancement, including access to CBRE Global Investors 5-Star Worldwide program. The 5-Star amenity program was definitely a differentiator, Lucht says, emphasizing that the program provides access to facilities and common areas in CBRE Global Investors 5-Star properties around the globe. And we will have a concierge service, which gives us convenient access to tickets and events in and around Atlanta. Agnew adds: It just gives you more flexibility and options. When completed, the new space will welcome visitors and employees with an interactive reception area that helps to familiarize visitors with the firm via descriptive exhibits, award displays, and company videos presented on a large-screen television. A larger, windowed conference room and four small meeting rooms provide flexibility for small groups or all-inclusive staff meetings. The new break room is on the perimeter to harvest the natural sunlight, while a soundproof wall separating the kitchen and conference room can be retracted into the ceiling to host group meals and large gatherings. Daylight passes through glass-walled perimeter offices to reach interior workstations. Five-foot panels help to maintain client confidentiality without sacrificing employees ability to converse and collaborate with their neighbors. We have collaborative space in this design, but we haven t gone to an entirely collaborative design because of the need for privacy, Lucht says. When more privacy is required, employees can step into one of several small enclosures set aside for such purposes. Both the higher workstation dividers and the private rooms resulted from employee feedback gathered during the company s needs evaluation. It was very important to us to have collaboration meetings with the firm, and we got a lot of good ideas from them, Lucht says. Those private rooms and high partitions run contrary to the current office trend of open work areas, but serve a needed function for Smith & Howard. That underscores the need for professional service firms to choose space and layouts that fits the way their employees prefer to work. Shown above, the Smith & Howard lobby with warm wood accents leading to a glass-encased conference room designed to take advantage of a stunning skyline view and maximize natural light. Photo credit: Pat Kelly 4 CBRE GLOBAL INVESTORS

5 TOP 10 SITE SEARCH CONSIDERATIONS FOR PROFESSIONAL SERVICE FIRMS A search for new office space gives professional service firms an exciting opportunity to create the kind of work environment that boosts morale and productivity, aids recruiting and employee retention, and strengthens the bottom line by eliminating rent and utilities costs for underutilized space. Here are bsome of the points every professional service firm should include in its needs assessment and site search. Query the Troops. Collaboration meetings with the staff helped Atlanta accounting firm Smith & Howard PC to identify several easily deliverable improvements that employees wanted in their new office space, including rooms for placing private phone calls. It was very important to us to have collaboration meetings with the firm, and we got a lot of good ideas from them, says John Lucht, managing partner at the firm. Gauge Accessibility. Professional service firms rely on client relationships, so it is important that clients be able to find and visit the company s offices when needed. Good access depends on the quality of the building entrance and elevator lobbies as well as proximity and convenience to major thoroughfares. Signage projects the company s brand, but in a more practical sense it also marks the place of business for visitors and should be placed accordingly. Evaluate the Amenities. The right combination of amenities can enable employees to live and play without enduring an energy-draining drive from the office. Today s young professionals gravitate to jobs in vibrant urban environments rather than at insulated suburban campuses. Plan for Parking. Highly efficient office layouts can drastically reduce the square footage required for day-to-day operations, but less leased space also reduces the number of parking places that most landlords will provide. Companies that occasionally will need to pack more people into their space should investigate options for additional parking, and if possible, secure those parking rights in the lease. Layout Considerations. Look for space that fits the company s work habits. Small floor plates may not work for an engineering company that requires extensive collaboration and interaction between departments but may be fine for a law office with multiple practice groups that can be divided among several floors. Floor-to-ceiling continuous windows provide better natural lighting than punched windows. Buildings with low ceilings can limit the effectiveness of natural lighting, affect decisions on partition heights, and render raised floors impractical. Share and Save. Why pay rent for a conference room that is only used once or twice a month? Some landlords now provide shared meeting space that tenants can reserve on an as-needed basis. Eliminating that square footage for meeting space from the lease contributes directly to the bottom line. in choosing employers and service providers. An office space with energy-saving programs already in place provides a readymade engine to drive a company s own green efforts. Inspect the Landlord. Certain companies manage properties better than others, observes Kirk Diamond, a principal in the Atlanta office of Cassidy Turley Commercial Real Estate Services and a veteran tenant representative. Ensure that the property and its tenants are well cared for, and be wary of owners that may be struggling financially. The recent downturn provided numerous examples of landlords that defaulted on mortgages and were replaced by a special servicer, delaying improvements and even normal maintenance spending. The property will not be maintained as nicely as you expected it to be if the money runs out, Diamond says. You don t want to be in a property that is not well-funded or that can t attract other tenants. You want landlords to honor financial commitments to you, honor commitments to other tenants, and perform operationally as well as service the debt. Room to Grow? Companies on a growth track need to get a handle on what their potential space needs will be over the course of the lease term and come up with a plan to handle the expanding headcount. A company needs to be able to grow without moving every three or four years because you re running out of space, Diamond says. Does the landlord have additional space that will be available for expansion down the road or perhaps adjacent land to accommodate construction of an addition at some point? If that kind of growth is expected, then it is a good idea to secure rights to that expansion space ahead of time. Security Check. Employees and clients need to feel safe in and around the office. Smith & Howard employees frequently work late evenings, and the firm encountered concerns during its site search about the safety of employees walking from downtown Atlanta office buildings to off-site parking. Its new lease at th Street in Atlantic Station eased those fears, thanks to extensive security cameras monitored around the clock and a private security force patrolling the development. For additional information please contact: Jeff Keppen Senior Vice President jeff.keppen@cbre.com 27117thstreet.com Go Green. In addition to saving money on utility bills, professional service firms that embrace energy-saving initiatives often reap benefits in the form of employee retention and client satisfaction. Gen X and Gen Y are more environmentally conscious than their predecessors in the workforce and are likely to weigh environmental responsibility A SERVICE PROFESSIONAL S PRIMER ON OFFICE SITE SELECTION 5