Innovation is prevalent in real estate and certain owners and operators are taking a first-mover approach to adopting technology that will improve their property operations and tenant experience. With so many different technologies to consider in 2019 (and beyond), it’s very easy to get overwhelmed, or to want to sit back and watch what others do first in the space.
Day in and day out, we speak with commercial real estate landlords who are in various stages of tech adoption – discovery, R&D, piloting, implementation, iteration, and more. In these discussions, we’ve noticed patterns in the types of owners and operators that embrace innovation and technology in their CRE portfolio. We believe these traits and approaches are also indicative of future success for commercial landlords operating within the current climate of CRE technology and tenant expectations. Regardless of owner or asset type, we’re consistently identifying these traits in CRE leaders.
Put the Customer First
CRE is quickly moving from a physical asset management business to a user experience business and this is forcing many owners to revaluate the value drivers at their properties. For many owners, being tenant-first is counterintuitive to how real estate typically makes money – keeping costs low and only spending on improvements to the property that will help it either retain its value or reposition the asset for future sale. But a premium tenant experience is driving value in new ways which owners cannot ignore – tenant loyalty resulting in increases in lease length and monthly rent amounts, and tenant recruitment resulting in low vacancy rates.
Being tenant first doesn’t mean just applying a WeWork-like veneer on top of an existing asset. The owners and operators who are successfully providing a premium tenant experience are focused on their tenants and what matters most to them. That isn’t always what the market says is on trend or in demand – it means they must have a deep understanding of who their tenants are, what they like or dislike most about the property, and finally, what improvements would make the biggest impact on their daily experience at the property.
If you want to take a tenant-first approach to owning commercial real estate, focus on:
- Learning more about each company that calls your office home, and the individuals that make up that business – where do they live, what is their commute like, what is their average income, what activities and amenities are of interest to them, what conveniences would impact their day, and what do they want to know from you.
- Take an audit of your current property and how tenants use the space – are there changes you can make to common area space that makes it more dynamic depending on time of year, time of day, type of person occupying the space, etc.?
- Incorporate technology that helps you view data about your tenant community – anonymized data that gives you insight into amenity usage, occupancy patterns, tenant feedback, tenant suggestions, and more, will make you a smarter, more informed, and more efficient property owner.
Communication is Key
We surveyed hundreds of tenants earlier this year about the disconnect between office landlords and their end user – the tenant – and learned that 69% of tenants have never interacted with their landlord or property manager. Depending on the property, this could have passed as normal or acceptable in the past, but now, there are a new set of expectations that tenants have for their office experience. They value transparency and communication because they crave knowledge and personalization.
Tenants — and not just office managers and the C-suite, but your average, every day employees — want an office experience that is unique to them, and that includes access to information and communication. They want to be informed about certain aspects of the property experience that is important to them – whether that’s interruptions to their work day like fire alarms or office maintenance, or alerts to the features and amenities that they take advantage of every day like fitness classes, happy hours in the lobby, or perks and discounts from local retailers. It’s the property owners responsibility to own that communication.
In that same survey from earlier this year, we learned that 72% of tenants are unsatisfied with their current amenities. If landlords opened up the two-way lines of communication, they would essentially have an ongoing NPS score and pulse-check on how their tenants feel about the property. And as a result, they could make changes that will make an impact moving forward. As employee recruitment and retention becomes the #1 focus for companies of all sizes, office satisfaction is an incredibly important factor in the war for talent.
An R&D Mindset
It’s been said that much of the R&D in commercial real estate technology is happening via capital by strategic real estate investors and more traditional venture capitalists. Technology companies need capital to innovate, go to market, and iterate, and real estate investors are taking this as an opportunity to make a return on the most promising technology.
In most cases, this is extremely beneficial for all parties involved as strategic CRE investors have incredible knowledge, experience and distribution channels for their tech portfolio to access as they mature. Having some skin in the game ensures the investor’s commitment to the company’s success, so long as they give the company room to make their own industry learnings and subsequent product and company adjustments.
CRE owners should take a page out of this book and take an R&D approach to tech adoption within their portfolio. This means prioritizing a process that outlines their vision and focus for technology and following through to see its success. CRE owners that want to embrace technology should have a clear path for tech discovery, having conversations with others in the industry, conducting due diligence, and even incorporating some type of pilot to understand how tech will be adopted at their property and how the tech companies work with their property teams to ensure success. Finally, like traditional tech investors, successful CRE owners need to be patient and work with tech companies to iterate and test on the launch and ongoing engagement programs that will work for their property.
Proptech is doing much to revolutionize commercial real estate and the tenant experience. What was once on the bottom of the list of things to consider for CRE owners is now a top priority. Whether you’re already in the perfect mindset to adopt tenant experience tech at your property, or you want to get into that mindset, there is no doubt that 2019 is the year to take action and to adopt the traits that will set you up for longterm success.
Want to set up a conversation to discuss your own approach to tenant experience technology or proptech in CRE in general?