Larry Goodman is COO of HomeVestors of America.
You might often hear people—especially investors—say, “Well, what’s trending?” or “What are the current trends showing?” Before making any kind of purchasing decision, it’s important to understand how the market is currently behaving and what the projections are for the future.
As we are all aware, the commercial real estate industry got a bit rocked during the pandemic, sparking discussions of an industry recession. As more people embrace working from home, commercial buildings and office parks have been scrambling to recover lost profits as companies downsize their workspaces. However, not all is lost. There are ways to reinvent existing commercial real estate so it doesn’t turn into a financial black hole.
Trim the fat.
It’s common for people to feel uneasy when they hear the phrase “trim the fat.” Almost immediately many think of layoffs, but that’s not always the case. At least in commercial real estate, streamlining your operations can come from making the proper investments in technology.
Proptech—or property technology—is a great way to cut extraneous costs. Rather than remembering to manually send rent statements and payment reminders, you have a system set up to handle those tasks. However, an advanced proptech system can do so much more.
Smart buildings, or those fully invested in property technology, not only have automated systems for their paperwork but can also keep a finger on the pulse of the entire building. From managing the lighting and thermostats to air quality and enhanced security, these types of buildings meet the needs of occupants and owners alike.
Give the people what they want.
The most basic business principle is to learn what people need (or want), then provide a product or service that meets their demands. Commercial real estate has the capacity to do this in multiple ways.
A hot topic I’ve discussed before is repurposing properties. The supply of affordable rental properties is overwhelmingly low. That said, I also recognize that converting workspaces into homes isn’t always the best use of the space—not to mention it can be costly. So how do you make your property something people want? For starters, you might want to ask your tenants.
While it’s not the only factor driving lease negotiations, amenities play a large role in where companies choose to settle. In conjunction with the work-from-home philosophy, many companies have allowed employees to embrace a hybrid schedule. This gives people the choice to work where they want. Often, people will choose to split their week between home and office to stay connected with coworkers and their organization.
However, when people are working in the office, they still want some of the same perks as being at home. According to a survey conducted by Cushman & Wakefield, some of the top amenities employees desire include on-site food and retail stores, wellness services, communal space that tenants can reserve for social events and more:
• Security and controlled access: Employees want to feel safe at work. With an office building, the public typically has access to the main entrance. Having the proper measures in place to keep individual offices secure will give employers confidence when signing a lease agreement with you.
• High-quality internet: There’s nothing worse than getting to the office and realizing the internet is faster at home. When sharing a workspace, employees are also sharing technology and that includes fiber-optic communication. Employers need productive employees. Ensuring glitch-free technology in their office is paramount.
• Convenient commute: With employees having autonomy over their in-office schedules, employers don’t want to make the days their team commutes to the office difficult. Having plenty of parking spaces—especially free ones—will give your company a competitive edge over other office buildings. You’ll stand out even more if you’re located near public transportation.
I understand you can’t necessarily check off every one of the amenities listed above. Some things—like a bus stop located two blocks away from your building—are simply out of your control. However, there’s still plenty that you can take charge of.
Two of the popular features mentioned—a stable fiber-optic network and strong security measures—are things that can be incorporated into your property without changing the layout of your building, like adding a shared lounge space or on-site exercise area.
Take it one step at a time.
It’s unlikely that you’ll be able to make a lot of changes right away. Start small. Survey your property and your tenants first. Get an understanding of what you currently offer, then get a feel for how it’s perceived.
Your questionnaire should include a list of amenities you currently have. There’s a chance some tenants may not be aware of all that’s available to them. This way, you’ll get a true sense of what people like and what you may need to change.
Consistently communicating with your tenants and piecemealing your development will allow you to pivot your strategy as needed while still meeting occupants’ demands.
If you’re new to the commercial real estate game, you’ve got a great wish list of essentials to look for when visiting and bidding on properties. My advice to newcomers would be to focus on the location first. If a potential property is located near a metro station, that’s a great feature. From there, you can work on employing additional amenities.
A good investment is born from both compromise and hard work.
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