It’s safe to say we’re seeing an evolution of office space in commercial real estate (CRE). Work from home and hybrid work are on everyone’s minds. That’s for good reason, as research from JLL shows 53% of organizations will make remote working permanently available to all employees by 2025. Meanwhile, 77% of organizational leaders agree that offering remote or hybrid work will be critical to attracting and retaining talent.
And although key performance indicators for commercial office spaces are below pre-pandemic levels, there hasn’t been a dramatic crash for the CRE industry. Remote and hybrid work hasn’t signaled the end to commercial office leases. Instead, it’s caused organizations to rethink how they use their office spaces.
That leads to huge opportunities for CRE landlords.
The Evolution of Office Space in the Hybrid Work Era
The number of employers not offering some form of hybrid working option has dropped from 45% pre-pandemic to only 9% today, according to The Future of Work Survey 2022 from JLL. Consider this: The JLL research shows that 73% have planned or are planning to make all office spaces open and collaborative with no dedicated desk spaces. All this is adding to the evolution of office space and leading to new office space trends.
Tenants still need office space. They’re just rethinking and approaching office space in new ways. And they are looking to commercial building landlords for guidance as they take on the task of reconfiguring their office spaces. It’s time for CRE landlords to step in as a partner to help tenants meet their goals and tackle these new office space design trends. Doing so will only help to build loyalty and tenant retention.
Tip 1: Utilize Your Data to Help Tenants – And Renew Leases
Remote and hybrid work is forcing tenants to make decisions about their lease renewals. Tenants have many important questions to answer about the evolution of office space for their organizations. They need insight into:
- How much space is needed if employees only come in part of the week?
- Is the building healthy, safe, and conducive to productivity?
- Which spaces are being used the most?
- Does the building have amenities that will motivate employees to return to the office?
CRE landlords need to get involved from the start to stay ahead of potentially negative outcomes, such as space reduction or nonrenewal of leases. CRE landlords should provide data as a service to their tenants. As a CRE landlord, you can help answer these questions and influence tenant decisions. At the very least, you will have early insight into potential problems.
Learn how to start your data strategy by reading “Data as a Service in Commercial Real Estate: A New Operating Model in the Hybrid Work Era.”
Tip 2: Create Buildings People Want to Work At
Smart CRE leaders know they need to align their buildings’ physical infrastructure and technology systems with a more inclusive and personalized workplace strategy. It needs to be one that reaches every person who touches the building.
A huge part of the strategy is considering what will make people want to get out of bed, get dressed, head out to their car or public transportation, and make the commute.
“Companies are hoping to entice new workers with office amenities like outdoor space, daycare, and catering. Although the best amenities vary from office to office, they’re critical to finding and keeping top talent,” according to insights from J.P. Morgan.
In addition to the physical amenities, CRE tenants are planning to continue investing in technology that adds to the workplace experience. In fact, 52% of property teams plan to increase the role of digital programming in their workplace strategy via building apps. Such programming includes online fitness classes, cooking and hobby classes, wellness tips, and more.
Learn how to create a winning tenant engagement and retention strategy by reading “Tenant Engagement Strategy: 3 Ways CRE Landlords Can Create Buildings People Want to Work At.”
Tip 3: Play up the Premiums
Tenants reducing space needs doesn’t necessarily mean a rent reduction. Again, we’re not facing the end of the commercial office. We’re facing the evolution of office space in a hybrid work era.
“More and more tenants, in light of hybrid work, are looking at shrinking the amount of space they have. For landlords this is a mixed bag. The downside is that tenants are looking to shrink the amount of space they have,” Steve Robins, Director of Product Marketing at HqO, said during a recent webinar titled “The Future of Work: 3 Must-See Takeaways for CRE Landlords.”
“The upside is that those same tenants that need to shrink their space are becoming more demanding and they want their space to work hard for them. And guess what? Harder working space is going to command a premium,” he said.
Tenant data is key for success in this regard, according to Scott Sidman, EVP Business & Corporate Development at Building Engines. “With insight and data, people can begin to make better decisions on how to reconfigure the spaces they are in,” Sidman said during the webinar.
Learn how to lean into tenant data and command rent premiums by reading “It’s Time to Make CRE Buildings a Destination for Tenants.”
How to Stay Ahead of the Competition
How are you adapting your strategy for the evolution of office space in today’s hybrid work era? A focus on tenant experience will be the top thing that wins new leases and renewals. Learn more about how to stay ahead of the competition and compete in a changing workplace by exploring the interactive eBook, “How to Create Commercial Buildings that Attract and Retain Occupancy.”