Nick Romito, CEO of VTS.
getty
The office ecosystem we’ve known and understood for nearly a century is over. Regardless of the size of the company or industry, companies need to rethink how much office space will be needed in the future, as well as how that office space will be used by their employees.
For me, the work-from-home vs. office model is no longer the real debate. Nearly three years into the Covid-19 pandemic, although we have seen fluctuations in demand, the need for most businesses to have a physical presence in the form of office space still remains.
However, my business VODI February 2023 (“VTS Office Demand Index”) report (registration required), which compiles data from the US office markets, found that new demand for office space is currently down 46% from the average level from 2018 to 2019, which is our benchmark for pre-pandemic normality. That level of new office demand is significantly lower than in 2022 and through most of 2021.
What does this mean?
This data highlights that we are in a renewal market and with very limited demand, the importance of retaining tenants is at an all-time high. That’s why I believe landlords should arm themselves with the right technology and data that can help them gain actionable insights into what it takes to keep existing tenants happy in their workplace. Tenant experience technology can provide landlords with the insights they need to understand exactly what the employees occupying their office spaces are looking for and then meet those needs.
What can landlords do to stay competitive in a renewal market?
Know what your existing tenants want
Capturing tenant insights is part of the puzzle; acting on it is another. As I expect 2023 to be largely a renewal-focused market, implementing a means to manage tenant relationships and improve their on-site experience can help tremendously. Today’s technical solutions can help you retain existing tenants and attract new ones when demand is limited, by providing insight into what employees care about in a building, while giving you the information to make data-driven decisions about portfolios to.
When vetting technical platforms to implement these solutions, pay attention to the type of data the platform offers you. At a minimum, you should be able to see occupancy trends, real-time data on space and amenity usage, property performance, and tenant activity.
Provide flexibility
Flexible spaces are at the top of tenant requirements. According to CBRE “U.S. Real Estate Market Outlook for 2023,” “High-quality and well-located office buildings with amenities that enhance employee well-being and engagement are poised to capture the most interest from occupiers.”
Employees are increasingly saying that hotel-style features influence their desire to come to an office, including some who see not providing the right on-site amenities as a deal breaker. Returning to the office, most employees want to occupy workstations that allow them to work on different stations with uninterrupted connectivity.
They also want to have access to open collaborative spaces such as lunchroom benches and more “living room” style areas for a more casual atmosphere to socialize within the office environment. But at a time when private offices are usually reserved for upper management, employees also want access to enclosed spaces when they need to work quietly and in isolation.
From a digital standpoint, I find that tenants are looking for tech systems that integrate with the on-site experience, whether it’s for meeting room bookings, handling guest and reception check-ins, or controlling the HVAC .
Provide a 360-degree view of all your portfolio activities
Again, in a renewal market, data is key to navigating uncertainty. Ensuring you have a 360-degree view of your portfolio activities can give you and your leasing team the visibility to make strategic decisions and get ahead of potential job opportunities. This allows teams to work more efficiently, freeing up employees’ time for other outputs to bring in new customers and manage other parts of your operations.
Some of the key elements to get a better picture include upcoming rental expiration dates, current tenant relationships, tour activity in your portfolio, and trends in the market.
In general, it is necessary to proactively build and maintain relationships with your tenants, not just when you notify them that their lease is about to expire. Be sure to maintain a regular rhythm of communication and make sure you understand their needs as they change.
Integrate technology
I believe that the use of technology should be an integral part of your portfolio strategy and management, especially in an unstable market. Commercial real estate decision makers need the agility that up-to-date insights provide to drive their strategy and operations and stay ahead of the competition.
Technology and data have made commercial real estate operations not only more efficient, but also better informed, leaving them out of the dark. In a shaky economy and real estate market, I see this as the path to better understanding your tenants and making sure you don’t leave dollars behind.
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