Shortly after Sprint announced it would attempt to merge with T-Mobile, the company took on an odd project: redesigning its headquarters. The telecommunications giant brought in WeWork to bring a more modern look to its $920 million campus in Kansas.
Soon after becoming CEO in May, Michel Combes announced that Sprint Corp. would embark on a redesign of its headquarters campus.
Sprint’s renovation project will amount to much more than window dressing. WeWork, the coworking innovator and budding designer of corporate spaces, will take a lead in transforming an imposing brick campus into space that’s attractive to top talent.
Fixing up the campus may seem an odd distraction for a company pursuing a $26.5 billion merger with T-Mobile US Inc. — a transaction that would relegate Overland Park to the new company’s “second headquarters.” But it’s actually an important move that positions the wireless carrier for the future, whether that involves finding its place as part of a larger company or fighting for market share as a standalone carrier, should regulators block the merger.
“The campus is 20 years old now; it needs to be updated,” said Tim Schaffer, president of AREA Real Estate Advisors. “Partnering with (WeWork) is not only going to give the organization a hand up in the way their people want to interact and work, but also make the space they don’t need marketable to a greater number of companies.”
The redesign went beyond pure aesthetics. It also poised Sprint to sell its 200-acre headquarters in Kansas, which it closed nearly a year later in March of 2019. While this article was written before the sale, I was able to foreshadow what such a massive deal would mean for Overland Park’s real estate market — and Sprint’s workforce.
WeWork’s influence
Combes’ charge as CEO is to keep Sprint pushing toward the future — whatever that holds. He broached the topic of a headquarters renovation during an event meant to rally the company’s employees to press on.
“We’ll make it well-suited to keep and attract new talent for the company,” Combes said of the campus. “It’s an absolute priority to invest in you and the campus, and it’s key to change the way we work.”
Although WeWork is known for its trendy shared office spaces, it has begun designing headquarters and satellite offices for larger corporations. The New York-based company struck a deal with Microsoft Corp. to give the tech company’s employees access to WeWork coworking spaces. Facebook Inc. is among another group of companies that have called upon WeWork to create office spaces solely for its employees.
Mass Appeal’s offices in New York were WeWork’s first custom build. The eclectic, colorful space includes nods to the media and entertainment company’s roots in hip hop and as a graffiti magazine. The office combines a mix of desks, tables and plush couches, as well as a recording studio for Mass Appeal’s artists. It also features custom artwork, including a large mural depicting the first year Mass Appeal magazine was published.
WeWork spokeswoman Alyssa Botts said in an email that enterprise members — companies with more than 1,000 employees — now make up a quarter of WeWork’s membership base. Enterprise members also are WeWork’s fastest-growing business segment, up 370 percent last year from 2016. Among its enterprise members are big names in the tech and financial sector, such as IBM, Standard Chartered, GE, Salesforce and Liberty Mutual.
In addition to the campus renovation, WeWork and Sprint have one other common connection: SoftBank Group Corp., which has a nearly 85 percent stake in Sprint, invested $4.4 billion in WeWork last year.
Sprint Executive Chairman Marcelo Claure tweeted that collaborating with WeWork on a headquarters renovation was a “testament of our commitment to the (Kansas City) region and the power of the SoftBank ecosystem.”
Changes on campus
Sprint’s $920 million Overland Park campus was a game-changer in the market when it opened. With 17 brick office buildings linked by sidewalks and green spaces and surrounded by parking garages, it spoke to a company preparing for strong growth.
But times have changed. The campus was built to accommodate 14,000 employees, yet Sprint employs about 6,000 locally today. Of the roughly 4 million square feet of space on the campus, about 1 million square feet are leased to outside companies, according to CBRE, with an additional 332,938 square feet available for rent.
Giving a more modern, open-office design to the campus will give Sprint an opportunity to suit its present needs, as well as provide options for the future.
“Certainly, Sprint will be able to consolidate within their campus because of the type of space they’re going to,” said Greg Swetnam, principal and director of office brokerage at Kessinger/Hunter & Co. LC. “They’re tearing the wall down and pushing it in a little tighter to make it more inviting and more appealing.”
It’s also possible that WeWork could open a dedicated coworking space on the Sprint campus. Although neither company has confirmed plans, Combes’ comments indicated that the idea was at least on the table.
“When you want to own 5G (the next generation of wireless technology), when you want to own digital, when you want to own artificial intelligence, we need to have small startups around us,” Combes said. “I want some of those startups to come to the campus and to help us to develop the company.”
More companies are seeking flexibility in how they use their offices, said Matt Druten, co-founder of Edison Spaces, an Overland Park-based provider of what it calls collaborative office space. In particular, the lack of a long-term lease appeals to small and midsize companies.
“You can increase the size of your team into a larger office or smaller office overnight,” Druten said. “You can go from a three-person office to a 12-person office to an eight-person office, which happens to most small companies.”
Kansas City has shown an appetite for coworking spaces. At WeWork, Plexpod, Edison Spaces and others, they’re being filled almost as quickly as they’re being developed.
“Take the WeWork concept, and plug it into the Sprint campus. You can see the potential success they would have at the Sprint campus if they choose to do that there,” AREA Real Estate Advisors’ Schaffer said.
Ripple effect
Whatever Sprint does with its office space, the broader real estate market will feel it.
“You can’t talk about the South Johnson County office market without talking about Sprint,” Swetnam said. “The Sprint campus is a huge facility. … In a secondary or tertiary market like Kansas City, it just pulls all of the air out of the room.”
Since Sprint began offering swaths of space for lease, speculative office development has slowed to a crawl. Swetnam said the Kansas City office market also hasn’t seen any significant rent growth for the past seven or eight years.
Sprint’s campus is ideal for large tenants, with ample parking and amenities such as gyms and cafeterias. However, the lack of visibility might not suit some tenants, such as law or accounting firms.
“It’s a wonderful facility. It makes a ton of sense for a corporate headquarters,” Swetnam said. “But like a lot of other corporate headquarters, it gets built a certain way.”
If Sprint puts large chunks of new space on the market, it could continue to mute demand for new single-tenant office buildings in Johnson County. If it offers more smaller spaces, the campus could become a bigger competitor to multitenant spaces in the market, Schaffer said. That market has single-digit vacancy rates.
“It is a game-changer for South Johnson County,” Schaffer said. “What WeWork provides is the opportunity for different-sized tenants. … It could potentially be really disruptive.”
Originally published in the Kansas City Business Journal, July 20, 2018.