Commercial real estate (CRE) data has spoken: when considering what to do with your office space this year, you need to put your tenants at the very center of your workplace planning strategies.
In a recent CBS News article, Megan Cerullo discusses the aftermath of the COVID-19 pandemic on office buildings and the tenant companies who lease from them.
“Overall across the U.S., leasing activity has dipped in tandem with employees and employers rethinking traditional five day work weeks with every day spent in the office,” she wrote. “In New York City, for instance, Midtown Manhattan’s office availability rate — a measure of commercial spaces that are either vacant or about to become vacant — is nearly 18%, up from about 10% before the pandemic, according to CBRE, a global commercial real estate firm.”
These patterns, Cerullo explains, are representative of a much larger shift in power dynamics. The article also quotes Peter Braus, Co-founder of New York City Real Estate firm Lee & Associates on the matter:
“Everyone knows central business districts are far lower-traffic areas than they used to be and we feel like even with office occupancy returning at a slow pace, it’s going to be a long time, if not maybe forever, until there is five-day office occupancy. I think in terms of whether it’s a tenant’s market or landlord’s market, clearly we are still in a strong tenant’s market for most of the office sector.”
So, what exactly does Braus mean by a tenant’s market? It’s simple: the key to attract and retain tenants is by focusing on adding value to buildings to improve the workplace experience.
The Key to Tenant Satisfaction
In today’s world, modern tenants expect a modern workplace. This implies anything from the implementation of tenant experience software (such as access control, digital programming, or even digital convenience services that cover every day needs like dry cleaning and food order ahead); strengthening your building’s sense of community through world-class amenities and communications tools; or the ability for property operations teams to predict the needs of the future workforce through regular feedback and data and analytics.
These features, which were once thought of as “nice-to-haves” in the office, are commonplace for the everyday consumer. After all, tenants and their employees already benefit from many of the same luxuries at home through platforms that can anticipate their needs and improve their daily experiences (think of Google Maps, Siri, Spotify, and even Netflix). This type of technological engagement also has a place in tenant engagement strategies. After all, selecting the right building app can take care of all of these needs and more, setting companies up for success in the long-term as technology continues to evolve.
The Power of Scenario Planning
In order to improve physical office spaces, landlords and property teams can look towards leading companies and how they’re tackling the issue of talent management. Many of these companies are operating under the assumption that the typical five-day work week is a thing of the past, and fully buying into hybrid work models that enable employee choice while still placing emphasis on an in-person office culture. This type of flexibility enables companies to adjust to any workforce scenario, be it a global pandemic or other smaller, daily needs.
In fact, Pinterest just recently revealed their workforce planning process for their own offices around the world. In an April 4th post, they announced PinFlex, “a uniquely Pinterest work model that provides employees the autonomy to live and work flexibly, while prioritizing intentional in-person collaboration at our world class offices. For work that can be performed anywhere, our employees will be able to choose where to work, whether from a Pinterest office, their home, or a virtual location. For activities and projects that are best done in-person, teams will plan to visit a Pinterest office, and Pinterest will cover travel and expense costs for employees who live outside of a commutable distance.”
Now, this progressive of a work model is not possible for every tenant company who is looking to adjust to modern needs. However, there are two key points companies (and landlords looking to support tenants) can take away from the Pinterest model. The first is the acceptance of hybrid work. Pinterest is no longer expecting every employee to come into the office every day per week, allowing employees to choose the environments and schedules that allow them to do their best work. The second is that Pinterest is pushing in strongly on the collaboration side of the office.
“Teams will plan to visit a Pinterest office when partaking in collaborative work or celebratory culture building,” the company explains. “For more autonomous work, they’ll have the flexibility to live and work where they choose, whether that’s at home, in-office, at a café, or wherever else they feel inspired. Our offices will continue to provide our employees with the tools, resources, and comforts they need to do their best work and they are encouraged to visit as frequently as they would like. All employees will be expected to visit a Pinterest office at least once a year to connect with one another and to engage in culture building activations like Knit Con.”
Bringing Offices into the Future
Companies like Pinterest are investing more in redesigning their spaces for collaboration purposes, which is a growing trend HqO is seeing across its own customer base.
Though the future is never certain, there are a few simple truths we can base our understanding of the current market off of. As the power shift in CRE continues, many landlords and property teams will need to find new and engaging ways to support their tenants as they rethink their short- and long-term office strategies.
Most companies will indefinitely adopt hybrid work. Many more will retain their office spaces, though their leasing contracts may change as space needs change. Regardless, the more well-equipped their building is for technology, hybrid work, and collaboration spaces, the more likely tenants are to stay in your building when it’s time to rethink their contract.
