Survey Says: The Office Remains a Driver of Business Success

By John Salustri

To paraphrase Mark Twain, the death of the office has been greatly exaggerated. New research confirms that, despite the havoc wreaked this year on the sector by the pandemic, the office remains a key ingredient of business success, and the role of property managers remains critical.

Breaking through the noise of buzzy headlines, the latest verdict comes from the tenants themselves. It’s found in the responses of the more than 3,000 U.S. office space decision-makers who participated in a groundbreaking national study commissioned by BOMA International, underwritten by Yardi and developed by Brightline Strategies. The just-published BOMA International COVID-19 Commercial Real Estate Impact Study examines the impact of the pandemic on office tenants and provides a clear picture of the transformational effects of COVID-19 on the office sector.

Not only did the study verify the long-range role of the office as a pillar for business success, it underscored the support of building owners and managers—which continues through the depths of the pandemic—as an essential business asset. That’s not to say, however, that tenants and managers alike aren’t faced with COVID-19 challenges, and the survey brought those challenges into high relief as well. But, proactive property managers won’t leave those challenges unanswered. Therein also lie ample opportunities to enhance their relationships based on defined need.

THE OFFICE WORKS

There’s no doubt about the future of the office. Nearly three-quarters of surveyed tenants—and 77 percent of C-suite executives and business owners—report that the office is vital to conducting a successful operation.

Building managers also get high marks, with 78 percent of respondents approving or strongly approving of how their building teams responded to the health crisis. Contributing to that score were their communications methods—with 79 percent saying landlords reached out “just the right amount.” And, clearly, the communications needn’t be elaborate or costly for building managers to score a big win. The method of choice was email, favored by 63 percent of tenants, with some sort of strategy guide and in-building signage coming in second and third. Lower down on the list of preferred outreach methods were quarterly video calls with building managers, as well as prerecorded videos and webinars or “town halls,” none of which were capital-intensive solutions. Those high marks move directly to the bottom line, and 47 percent of respondents say that, based solely on building managers’ responses to COVID-19, lease renewals are somewhat or very likely.

By comparison, pre-COVID, 55 percent of surveyed tenants would renew if their building teams focused on communications; investments in advanced processes and technologies; and, on the softer side, relationships (46 percent see more value in a personal relationship with their property managers). That score jumped to 66 percent post-pandemic.

MORE WORK LEFT TO DO

At 66 percent, renewals are clearly not a slam-dunk, and nearly as many tenants—61 percent to be exact—plan on some reassessment of their space needs. And, of those, 54 percent either are planning to cut back on their square footage or are unsure. Thirty-three percent would either expand their spaces or stay put.

If (or when) space users make their cuts, where will they happen? The winner—or loser in this case—was common areas, voted by 36 percent of respondents. It was also the number one choice of all occupants when segmented by the size of their holdings. Drilling down more, tenants suffering low 2020 revenues outweighed their high-revenue counterparts in their eagerness to cut common areas (43 percent of lower-revenue responses compared to 30 percent of higher-revenue firms).

Reducing the size of private offices came second at 28 percent and reducing the number of private offices placed third at 27 percent. Rounding out the top five, a reduction in conference room size was selected by 27 percent. Only then do we start to see changes in working protocols, with 25 percent of respondents eyeing adoption of hoteling or flexible work desks for teleworkers. It should be noted that, in this age of high single-digit unemployment, a relatively low 23 percent of respondents are considering cutting their workforce. Not surprisingly, most of these are lower-revenue firms.

Impact on Renewal

                 













Q: Have your property manager or landlord's responses to COVID-19 made you more likely to renew your lease?

What’s driving these space decisions? Also not surprisingly, cost (34 percent); location and proximity to clients, customers and employees (31 percent); and safety and security (25 percent). These three rank the highest (or second highest) by tenants responding to the survey.

Herein too reside opportunities for building managers to enhance their relationships and, possibly, their renewal rates. Homing in on tenant needs for space cuts, working with them to develop solutions and communicating to them your safety and security strategies all send a clear message of proactivity on their behalf.

There’s a fairly tight cluster of responses around new protocols occupants plan to put in place, whether or not they’re reassessing their space needs. In the low-hanging-fruit category, 80 percent of respondents plan to enforce the universal use of face masks. Seventy-four percent will enforce occupancy limits in common areas, and 65 percent plan a staggered return-to-work schedule.

MAKING SENSE WITH THEIR DOLLARS

With cost concerns high on tenant radars, how much of an impact would those space cuts have on their bottom line? Forty-seven percent envision increases, while 35 percent would still suffer revenue losses. Eighteen percent expect no change in their revenues, 24 percent of whom are tenants of 1,000 to 5,000 square feet. As a generalized statement, more larger space users tended to reap revenue improvements as a result of their post-COVID cutbacks than smaller firms.

In terms of the perceived value that certain building-provided protocols and products could bring, the survey highlighted five and linked to them the number of tenants who would pay a premium for them. The Big Five (in descending order of rank) were: maximized fresh air (37 percent); the installation of large and prominent disinfection stations (21 percent); twice-daily full sanitization with chemicals and ultraviolet treatment (17 percent); additional front-desk staffing to ensure safety policies (13 percent); and an on-site health and wellness advisor (11 percent). No fewer than 33 percent of respondents checked the “would pay a premium” box in any of those five categories. The top-rated fresh air/heating, ventilating and air-conditioning (HVAC) concern ranked highest in the premium question, at 47 percent of respondents.










Q: How likely are you to reassess your space needs based on business impacts from the coronavirus?

It’s interesting to note that 49 percent also indicated their interest in more flexible, shorter lease terms, while 42 percent desired longer terms with clauses that speak to health.

Of those who are reassessing their spaces, there are a few other areas, either paid for or complimentary, where building managers could pitch in (presumably with the previously mentioned benefits to renewals). These are access to vacant spaces for social-distancing purposes (71 percent); building out dedicated teleworking rooms and office relocation services (52 percent); and providing relocation services (62 percent). However, the perceived level of employee comfort provided by each of these provisions never ranked below 50 percent.

THE VALUE PROPOSITION

Arguably, it is here that the light property managers bring to the chaos of COVID-19 shines most brightly. When asked about the investments property owners and managers are making in the physical features and infrastructures of their assets in the name of tenant safety, the score is a fair 65 percent, but with about 35 percent of respondents holding off, either unsure (27 percent) or seeing no value (8 percent). What’s more, 62 percent of office tenant respondents recognize the importance of their physical environments for facilitating the human connections that contribute to productivity and then, by extension, the most successful businesses.

As BOMA International continues to unpack the results of the study, both on a national and regional basis, it becomes clear that property managers have more work to do to close the gap in tenant relationships. But, it is equally clear that the most proactive building professionals are taking the lead in the items they can control, communicating their concern and involvement in the health, safety and productivity of their tenants.

About the Author: John Salustri is editor-in-chief of Salustri Content Solutions, a national editorial advisory firm based in East Northport, New York.

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