Changes In Commercial Real Estate Are Rewriting Landlord Rules For The 21st Century
The digital transformation is more than just another buzzword. As the millennial workforce prepares for middle age, Gen Z is now also entering the workplace and continuing the drive for better technology and mobility. The future of commercial real estate is forcing landlords to evolve and meet a new set of tenant demands.
The entire landscape is evolving as we increasingly see consolidation and specialization in new and upcoming industries. Even finance, which has previously been accused of being slow to adapt to the digital world, is beginning to embrace flexible office space and diverting from its traditional office background. Tenants now have a much longer list of requirements than the traditional amount of square footage based on X amount of square feet per head.
Using office space in multiple ways to provide greater flexibility and efficiency is rapidly rising to the top of wish lists in boardrooms across the globe. The key words here are “flexible” and “service.” Commercial real estate is being disrupted by tenants who have seen that flexibility and service can be a reality thanks to companies offering these types of perks to work spaces. Traditionally, landlords have thrown companies into these concrete boxes, while they take a check every month until your 10-year lease is paid off. As the head of a flexible office space provider, I know that it is imperative that this tradition changes.
Why The Modern Office Needs A “Third Space”
Digital natives now expect the ability to work on the move across a plethora of devices and their requirements can be as simple as an internet connection in a quiet space for an impromptu meeting. The office landscape as we know it is changing and the mobile working revolution is helping third spaces race to the top of wish lists.
As a result, we are witnessing a rise in third spaces that enable businesses to flex when required with additional meeting rooms, facilities and amenities. The increasing need and desire for reimagined workspace is only the beginning of the disruption of commercial real estate.
Tenants are leading a fundamental change and forcing landlords to pay attention. There will always be a tendency to cling to the past and operate as business as usual. But, it’s not as simple as carving out a little part of a building to satisfy these needs and outsourcing some aspects to companies like WeWork. Landlords need to take a step back and have a wholesale look at the way they’re approaching space, how they lift up their buildings and change their customer engagement mindset. While most landlords have the resources to do this, they just can’t see the financial justification to invest in systems that support change. However, I believe this is beginning to change. In the interim, they are outsourcing this change to operators like us.
A Closer Look At The 21st Century Landlord
Historically, landlords would divide their assets into concrete boxes and attempt to lock tenants into costly long-term leases that run for five to 10 years. But, times have changed and even retail giants like Amazon and Google are embracing the so-called pop-up era. Commercial real estate landlords should already be thinking about offering more flexibility, more amenity, more community and a customer service experience to avoid empty or underused real estate. Some key approaches landlords should consider include:
1. A mix of long-term leases with flexible space options must be created.
2. The building experience needs to change to be more service- and hospitality-oriented.
3. Landlords must focus on building service income streams, as well as rented income streams.
4. Use common areas to better create amenity and community within the building.
The future of reimagined office space looks incredibly promising for obvious reasons. But the bigger question is how those involved in commercial real estate need to reimagine their systems in order to meet an evolving set of requirements for their future clients. In a world where industries must disrupt or be disrupted, the time to hone in on customer pain points is right now.
Source: Forbes. January 30,2018.
Author: Marcus Moufarrige
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