Commercial real estate is in the midst of a technology revolution. Need proof? Just look at all of the tech startups that have had success in the industry over the last few years.
Market data providers like Compstak have carved out a big niche by putting commercial real estate data at professionals' fingertips. Companies like Convene and WeWork have grown exponentially by giving their clients flexible office and meeting space. And landlords and brokers have onboarded over 6 billion square feet of space onto the VTS platform to streamline their leasing and asset management processes. The list goes on and on.
Technology isn't just making commercial real estate more efficient; it's changing tenant expectations. Meeting those new expectations will allow industry players to thrive. To get there, commercial real estate professionals need to adopt a user experience mindset - not just landlords, but brokers too.
Technology has made customers more powerful in nearly every industry by giving them the ability to compare products, pay for them more flexibly, and find solutions tailored to fit their needs. For example, Airbnb allows people to access less expensive, short-term accommodations, aided by a simple booking process and friendly customer service.
This attitude has trickled into the business arena. Enterprise tech sales reps used to be able to sell products right to the CIO without worrying much about the analyst who would actually be using it.
That's not the case anymore. These days, companies want products that not only solve problems, but differentiate themselves by delighting their users.
Until now, commercial real estate has lagged behind. Historically, landlords viewed their job as building spaces in good locations and keeping them as fully leased as possible. Likewise, they saw their primary customer as the person who signed the lease.
Now companies like WeWork, however, are attracting tenants by giving them more flexible contracts and recognizing that their customers are actually anyone who's using their spaces every day.
In other words, these landlords are winning because they focus on the end-user experience. The next generation of successful commercial real estate professionals will be the ones who adopt that same mindset, and recognize that anyone who works in the spaces they lease is their customer.
Brokers may think they don't need the user experience mindset. After all, the landlord is the one who's responsible for the space, right? All brokers have to do is lease it.
In reality, brokers need to understand these changes even better than landlords. As the liaison between landlords and tenants, brokers need to show potential tenants that a space can meet their flexible desires, shifting expectations, and specific business needs. Many methods can accomplish that, but they link back to the user experience mindset.
Brokers' future success will depend on their ability to understand and meet the needs of the modern tenant. And top priorities for these modern tenants are talent retention, enhanced productivity, and business flexibility.
First off, brokers have to recognize that tenants need agility. Whether it's a 50-year-old law firm or two-year-old start up, their market dynamics and customer needs are changing faster than ever.
As a result, for many companies leasing space, long-term leases just don't fit. They require shorter-term leases that give them the flexibility to quickly expand their space or contract the square footage based on changing headcount and strategy. This is a difficult shift to make because it's at odds with how brokers are compensated.
Regardless, the modern broker needs to be able to perform a diagnostic of the organization's space needs. The result will likely be a hybrid that consists of variables such as:
- X% stable long-term branded space
- Y% moderately flexible space for a one- to three-year term
- Z% highly flexible short-term space, such as month-to-month
Brokers then need to guide their clients through this discussion, and assist them in how they can best achieve it.
Additionally, the tenant evaluation matrix is meaningfully different compared to five years ago. The new must-have amenities are no longer just about the physical space outlined in the lease agreement.
Now what's outside, both in the building and the surrounding neighborhood, is just as important to tenants' experience. They should be asking the following questions and scoring buildings as outlined below. If they're not, then it's the broker's job to ensure they are.
Comparison of Building A and Building B
- Does building A or B have the infrastructure to support working outside of the physical office?
- Does building A or B help to engage employees? For example, does it offer wellness facilities, classes, and robust Wi-Fi?
- Does the neighborhood have a good vibe? What's the walk score?
- Does building A or B offer long-, medium-, and short-term flexible space options that align with the organization's needs?
- Does the tech and internet infrastructure in building A or B support the organization's needs today and during next three years?
- Does building A or B support the firm's culture and brand?
These are high stakes questions for a potential tenant. Measuring the quality of the user experience of a building for clients, backed by solid data, is a skill set that brokers need to acquire.
Embracing Tenants' Experiences
Speaking of data, engagement data about space usage will be another critical factor for modern tenants as they determine how to optimize their workplace to meet the needs of their people.
Can a landlord provide the businesses leasing space with information about, for example, how often the boardroom on the 12th floor is being used? Or the percentage of desks occupied at any one time?
Brokers who understand this crucial information will help tenants drive more value out from their spaces, while transforming how they conduct business within commercial real estate.
Finally, in the user experience-driven world, brokers will need to rethink the way they tour spaces and gather feedback about the property. Formerly, the broker conducted a typical tour by showing the tenant's top executives their corner offices and then calling it a day.
Today, however, leasing agents need to focus their tours on how their space will make every single member of the leasing tenant's team happier and more productive. And that old 20-page tour brochure won't cut it anymore either.
Consider using simple online surveys to gather employee space pain points and feedback prior to the search. Brokers also can leverage virtual tours to quickly scale the number of people (and decision-makers) who are able to experience the space without actually having to be there physically.
To give landlords the best possible advice, brokers need to become experts on the modern organization. After all, if brokers don't understand how companies operate and are actually using space, they are not going to be useful advisers to landlords. They may even lose deals.
This approach means recognizing the new trends and understanding what today's tenants need. Then, the most valuable thing brokers can do is to educate their landlord clients about these shifts and give them practical, actionable advice to help them successfully pivot toward a user-experience mindset. To get started, brokers should consider the following:
- Find the latest resources on the topic, such as blogs, research reports, case studies, and tweets by experts in the field, and share them with the landlord clients. Get the landlords thinking about the matrix above. Discuss how their properties benchmark on each factor against a competitor's set. If they compare poorly, brokers should share their thoughts for improvements.
- Set up a couple of tenant discovery sessions for the landlords where they can sit down with a modern tenant outside of the deal process and discuss their top concerns and needs.
- Being comfortable with data also is particularly important for brokers. They often will be working directly with tenant representatives to get their clients into their spaces.
These potential tenants are making data-driven site-selection decisions and have more information accessible than ever before. They will expect landlords and the landlords' representatives to be ready to answer any of their questions as they come up, with responses backed up with the appropriate data. Brokers will be able to make deals happen much more quickly if they can answer in kind.
These changes may feel unsettling to brokers. However, they're actually a huge opportunity. If brokers can master this new landscape and adapt to the expectations of modern tenants, they can differentiate themselves from the traditional brokers. The result will be to set these brokers apart, providing them with long, successful careers. All it takes is a willingness to learn and a shift in mindset.
Listen to Brandon Weber on the RE Insight Podcast with Scott Morey: