The Parameters of Office Demand Have Changed. Here’s What Owners Need to Know

The past two years have marked immeasurable changes across every sector of commercial real estate. Prominent among those is how tenants make leasing decisions, and what those tenants, particularly in the office sector, require today in their search for space.

Partner Insights spoke with Nick Romito, co-founder and CEO of VTS, the commercial real estate industry’s leading technology platform that transforms how strategic decisions are made and executed across the asset life cycle, about what those changes mean for landlords.

Commercial Observer: What are some of the biggest shifts you’ve noticed over the past two years in how companies search for space?

Nick Romito: When you’re looking for office space — of any size — the search starts online. It used to be that for bigger spaces, you went to see the product. Now, tenants want to see five spaces they know will work, not 50 that don’t. That’s a material shift between now and two years ago.

Another change is, it used to be all about, does that space work? Now, you want to learn not just about the space, but about the entire building and the attributes you can use to get your teams back into the office. Two years ago, you weren’t seeing people market that an office building had digital access, food and beverage you can order from your phone, etc. Now they’re imperative.

CO: What is some of the most prominent feedback you’ve heard from tenant rep brokers about what their clients are asking for?

NR: Having the first part of their process online is far more efficient for them because their customer can come along for the ride. The brokers can start by understanding what the tenant actually wants and needs using content like virtual tours, videos and microsites. Then, the tenant can go see spaces they already know they like, saving so much of their time. Brokers feel like this completely changes how their customers see them. They’re part of the modern workforce and not a legacy business that hasn’t changed.

CO: Have you seen any changes regarding how leasing decisions are made and who is involved in those decisions?

NR: Two years ago, it was usually the head of real estate and the CFO who evaluated a space. But because the office has gone from a workplace to a work center, a place for collaboration, now there are new people who are critical in the decision — the entire people team or workplace team within an organization. These are the folks in charge of the culture and company values, and they’re coming in to assess, does this building, not just the space, speak to the things our company stands for? Will it provide enough incentive for us to get our people to spend valuable time here three to four days a week?

Especially with a more distributed workforce, not everyone can be present for the in-person tour — another case for using digital content to move deals along.

CO: How deeply is hybrid work affecting what companies prioritize in an office?

NR: Deeply, because historically you were competing with your next-door neighbor. Now you’re competing with an employee’s couch. What you offer at that building has to make that person more productive than they are at home.

What we’re seeing is a massive shift in what owners are marketing about a building, like the fact that they have a tenant experience app like VTS Rise to help every employee get through security with their phone, or book the gym or a conference center. They can do everything in that building touchless from their phone, and that is now just as important to market as the space itself.

CO: So in this hypercompetitive leasing environment, what exactly is required to create a compelling tenant experience?

NR: Owners have to go all-in on providing tenants with a modern experience. Just putting in an amenity center is not enough. The building has to have the technology to help activate everything tenants can do within it. That touches on things using your phone to access the building or order lunch like I mentioned. But it also means choosing a partner that houses everything a tenant wants to do in one app. This creates sustainable engagement and means you get more access to data like occupancy trends, amenity usage and sentiment so you can make smarter capital investments down the road.

In VTS today, we’re enabling owners to make sure that the first impression of a tenant is a modern one. From the way tenants discover that building online, to being sent communications before they move in, to understanding how they interact with your space and which amenities they value most — those are the things VTS customers can do in this competitive environment that make it unfair for everybody else.

CO: Why are tenant relationships more critical now than ever before?

NR: This is going to be the first market in a long time where the amount of space coming online far outpaces the number of tenants looking for space, which means retention is everything. You want to be known as someone who’s delivering the best possible experience to a tenant. You’ll need to make sure that your teams across multiple asset classes are connecting and collaborating at the customer level.

Let’s say you’ve got Amazon (AMZN) in a warehouse, Whole Foods in your retail portfolio, and Zappos in your office portfolio. You have to make sure that every one of those leases across the different parts of Amazon’s business is happy and healthy so that if they grow, they’ll grow with you. That’s a big part of what VTS enables across asset classes — customer management that is analytically understandable, trackable, and actionable.

CO: Given everything we’ve discussed, how has VTS had to adapt its products to the changing times?

NR: Pre-COVID, we were a single-product company. Now, we’re a four-product platform, and that emerged from us working with our customers to solve problems they had. We became a platform where every member of our customers’ business teams has a home in VTS — from leasing and asset management to heads of marketing, portfolio managers, brokers, property managers and the C-suite.

CO: What does this all mean for the future of the VTS platform?

NR: Currently, we’re helping bring buildings online in the most modern and digital way, while simultaneously giving owners the ability to give their customers a remote control for the building with VTS Rise. All that data is coming back into VTS so owners can know their tenants like never before. Pair that with the integrated software, technology and insights the VTS Platform provides, and every business stakeholder now has real-time market information they need to do their job with unparalleled speed and intelligence.