Attitudes about the workplace have changed. Of the executives surveyed by Ernst & Young, only a very small number of companies have reported that 90% or more of their employees have returned to the office.
As a result, the target audience for leasing office spaces has changed. Tenants have reassessed space and quality needs and have begun to migrate from class B and C buildings to class A facilities. Because high-quality alternatives exist, older buildings that lack amenities or that have older fluorescent lighting or poor ventilation systems will struggle to attract and retain tenants.
The change in target audience also includes the type of firms that seek an “office-first” approach. Large finance firms, technology companies, and professional services companies have a greater likelihood of implementing an office-first/hybrid workplace. Property managers seeking to attract the new customer base should plan for accommodating the needs of core professionals who deliver client- and customer-facing services.
Certainly, tenant expectations about comfort, safety, and location haven’t changed. Yet traditional practices for attracting and retaining tenants have lost appeal. Very simply, tenant preferences have shifted. Values, lifestyles, and convenience are priorities for prospective tenants who have a greater awareness of their impact on the environment and a desire to contribute to society. With convenience redefined through connectivity, laptops, smartphones, apps, and other technologies, tenants want access to portals and apps that grant control over lighting, ventilation, heating, and cooling for individual office spaces.
Managing all the changes within the commercial real estate market is difficult. Although leasing totals dropped during 2022, the hardest times are around the corner. Because of the long-term nature of leasing cycles, the largest declines in leases will happen during 2024 and 2025. For property managers, the prospect of a larger decline in leases should spur innovative solutions.