5 tenant demands reshaping the office market
INSIGHT ARTICLE |
Tenant preferences are constantly changing. From aging baby boomers to millennials and Gen Zers, the marketplace is filled with ever-evolving tastes and desires, and office space is changing with them. The modern office has transformed from a destination into an experience, and building managers are customizing their spaces to align with tenant needs and habits. As buildings fight to keep up with these evolving tenant needs, managers are implementing a streamlined, tech-driven approach to help tenants define their space. Here are five ways tenant preferences are shaping the modern office:
1. Property technology for the office
Millennials are changing the property search process. Millennials make up one-third of the U.S. labor force,1 and 25 percent of millennials already hold leadership positions.2 As more millennials grow into executive roles within their organizations, the ways that companies search for office space are changing. More companies are turning to property technology, or proptech, to inform the property search.3 Platforms such as LoopNet and Reonomy allow potential tenants to customize their property search and find a space that most closely aligns with company goals.
There are also several proptech platforms that can equip buildings with the tools to help tenants activate and engage with their space. Tenant engagement platforms such as Skyrise and Tenenx provide a direct line of communication between office tenants and building managers. Property owners and managers can chat with tenants, send news and announcements to the entire building, and customize amenities and services for tenants. Proptech solutions also provide an efficient way for offices to keep up with evolving tenant preferences.
2. Leveraging data and analytics
To engage future tenants, and to retain current tenants, offices have begun to rely on a data-driven approach. Building managers are learning more about their tenants, including what kind of amenities they prefer and what type of office space they want.
“Business intelligence has been around for years, but with new proptech solutions there is so much data available at the click of a switch,” says RSM real estate consulting leader Michael Schwartz. “Many of our clients are using data to track tenant demands and rental rates. Being able to look at this information on a real-time basis helps landlords, tenants and their brokers take pulse of the market and make well-informed leasing decisions.”
Other companies are integrating geolocation services into their property search strategy. Mapping integrations provide an opportunity for companies to see a potential office space on a map, navigate where the property is and identify the best way to get there. These maps can help companies make more informed decisions about their real estate by creating a visual, data-driven experience.
3. The rise of remote work
More employees are opting to work remotely, and companies that fail to provide the option to work from home are facing consequences. In an annual survey of more than 5,000 professionals, the number of employees who quit their jobs due to lack of flexibility nearly doubled from 17 percent in 2014 to 32 percent in 2017.4 As fewer people work in the office, companies have started to downsize their footprints. Some companies have gotten rid of their offices altogether to save rent costs and accommodate employee preferences. But there are still employees at these companies who enjoy working from an office, prompting other businesses to lease coworking space for their employees.
4. Getting smart with office space
Smart buildings have become an attractive option for companies that want to make their offices more efficient and environmentally sustainable. More buildings have branded themselves as “offices of the future,” promoting new technology concepts as part of their amenities packages. Several high-rise office buildings are using high-speed elevators to get tenants to their destinations faster.5 At One World Trade Center in New York City, for example, elevator manufacturer and engineering company ThyssenKrupp produced and installed a customized elevator system that allows tenants to reach their office with minimal floor stops. The elevator can travel 2,000 feet/minute, bringing tenants to the 102nd floor within a minute.
5. The new tech hubs
When companies are looking for an office space, access to internet and cellular connectivity is one of the most important elements that factor into the leasing decision. In a recent study, 91 percent of decision-makers in the office-leasing process rated connectivity as a major factor in their decisions.6 To meet these demands, more offices are deciding to occupy offices in tech hubs or innovation centers. These locations offer access to connectivity and provide space for tech companies and startups to conduct operations, and are often in cities with strong data center activity. Atlanta’s Technology Square, for instance, offers research buildings and media centers near DataBank’s high-performance computing center, one of the leading data centers in the greater Atlanta region.7 These hubs provide digital connectivity to tenants and help build a community for the entrepreneurs and companies who share the space.
1R. Fry, “Millennials are the largest generation in the U.S. labor force” (April 22, 2018) Pew Research.
2C. Koblika, J. Atkinson, “Millennials as Leaders—A Crucial Competency Gap to Fill Now” (Sept. 20, 2017) Gartner.
3C. Williams, “The Beginner’s Guide to CRE Tech: What Does proptech Really Mean? 7 Industry Experts Explain ” (Nov. 16, 2017) BisNow.
4B.W. Reynolds, “6 Key Stats About Remote and Flexible Work in 2017, and 2 Predictions” (Dec. 8, 2017) Flexjobs.com.
5T. Powley et al, “World’s fastest lifts race to the top of the tallest buildings” (Nov. 6, 2014) Financial Times.
6“The Value of Connectivity” (2017) WireScore.
7M. Smolaks, “DataBank announces HPC data center in Atlanta’s Tech Square” (July 19, 2017) DataCenter Dynamics.
A version of this article written by Tara Lerman was originally published in BisNow.
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