These are challenging times for the owners of office buildings. The work-from-home movement has meant that many companies are moving to smaller office spaces as more of their employees work remotely at least part of the week. This has left many office buildings across the country with far higher vacancy rates.
And those building owners who don’t offer the latest amenities are finding it more difficult to attract tenants to their properties. Many office tenants today are looking for the highest-quality buildings to attract and retain top employees during a time of low unemployment.
There is an ally, though, that can help office building owners through these challenging times, property management firms.
The right property management firm can help building owners form a long-term strategy for their office properties. And these strategies to boost their buildings’ efficiency, sustainability and amenities might be one key to attracting tenants in today’s challenging office market.
We recently spoke to two property management pros working the Minneapolis-St. Paul market, David Wright, vice president of property management in the Minneapolis office of Newmark, and Todd Balsiger, executive vice president, regional manager and property management lead with the Minneapolis office of JLL.
These two industry veterans shared their thoughts on how the role of property managers has changed, both before and during the pandemic.
What are property management companies doing today, in light of the pandemic and so many people still working from home, to boost the value of office buildings for their clients?
Todd Balsiger: Property management plays a significant role in improving the value of buildings, and technology designed to make it more efficient to operate buildings is becoming very important.
JLL has always been a tech-forward company. But technology is even more important today for clients. When tenants come into office buildings, they want that hands-free environment. They want to scan their cards to get in. But there’s much more than that. We have a system at RBC Gateway in Minneapolis that when you want to visit me, you put your name into the system and the date that you are coming. You’ll receive a notification to your phone that acts as your pass. You don’t check in with security. You use your pass to get onto the floor to visit me, and that pass will only let you get to me.
There is even technology that lets you monitor the usage of restrooms. You can get alerts about how much paper and soap is available to let you know immediately if you need to refill. The technology continues to advance, and those office buildings with the most technology will continue to be the most attractive to tenants.
David Wright: Now more than ever, property managers and owners need to be communicating with their tenants. It used to be that property managers were the caretakers of the property, tending to the daily operations of the building. But we’ve seen the field evolve over the years. Property managers today need a broker background, experience with the financial side of the business and an asset-management background. Owners are more dependent today on property managers as they try to forge long-term strategies for their assets. When I first came into this business, it was about keeping the building clean, the lights on and the snow plowed. Now, property managers are more about serving as a long-term partner with building owners.
That technology is even more important today as companies are trying to get their employees back to the office, right? They need to do whatever they can to make their office space inviting to workers who have grown used to working from home.
Balsiger: The hybrid working environment isn’t going away. That will continue indefinitely. Businesses, our tenants, will need to rejuvenate the office spaces. Prior to the pandemic, owners were making a lot of improvements in their common-area spaces. Now, though, tenants want more collaborative spaces inside their office suites. They want spaces that encourage their workers to come into the office and work together.
Sustainability matters, too. Millennials and members of Generation Z want to work in an environmentally friendly space, one with a smaller carbon footprint. By providing these types of spaces, companies will have an easier time recruiting workers.
Wright: Technology takes on so many forms. It can include running a building on a high-tech automation system. Buildings that stay a step ahead of other properties are usually equipped with common-area conference rooms and training centers. They don’t just have one four-by-five screen on the wall. They have three or four of them, all over the room.
Quick ways to report issues within the building is important, too. It can be as simple as automated conference-room scheduling. In most buildings, we no longer take phone calls or emails anymore to reserve space. Tenants do it online.
There is even a push for elevator modernization. In some buildings we manage, we have screens inside the elevator shooting the latest news. If you have a building that is not taking the steps to become more tech-heavy, it is probably falling back in terms of its appeal.
Property managers, then, are working closely with building owners to incorporate services that help make their office buildings more attractive to both tenants and workers?
Wright: Property managers are the boots on the ground. They interact with the tenants every day. They know what is going on in that particular market. That is becoming more important to owners. Owners need to operate their assets as efficiently and effectively as they can. Property managers, then, need to understand where the opportunities are to improve the efficiency of a building. They need to be prepared to act on what those opportunities are. Property managers are key to maintaining the quality of a building, to help the owners in that building attract their next tenants.
Balsiger: Our goal is to help the occupiers in the buildings we manage recruit talent. We want to help provide an environment that will encourage workers to want to return to the office. We also want the buildings we manage to serve as a positive when companies are trying to recruit and retain workers. I think recruitment has gotten a bit easier in the last 90 to 120 days. Mid-pandemic, recruitment was very challenging. There were not a lot of people looking to move. If they were willing to move, they wanted astronomical compensation increases.
As property managers, we are a customer-service industry. We have to be on site to provide and deliver the customer service our tenants are expecting. We are not a work-from-home business. I can’t have my office staff working from home three days a week. They need to be there to help deal with whatever issues our tenants are facing. I wanted our staff to be in the office so that when tenants started coming back to the buildings we manage, we would be there to alleviate at least some of the stress they might be facing.
How important is communication with a building’s tenants today?
Wright: It’s important to be as proactive as possible with your tenant base. Not too long ago, if you bumped into a tenant in the hallway a couple of times a month and said ‘hello,’ that was the only communication you needed to have. Today, you need to understand what the tenants are looking for, what challenges they are facing as part of this new chapter of work. Your job is to get in front of what the building needs to do to satisfy any wants or needs of its tenants.
Speaking of people coming back to the office, are you seeing an influx of employees returning to the office buildings throughout the Twin Cities market?
Balsiger: That does depend on the business. Smaller and regional companies are bringing their people back. Downtown Minneapolis has a high population of law and legal offices. The lawyers in those offices never seemed to stop coming in. But overall, you can see that more people are back to their offices, especially on Tuesdays, Wednesdays and Thursdays. That’s when traffic picks up in downtown Minneapolis.
The office environment will never go away. You have to establish a company culture and you can’t do that remotely. Remote meetings have become a great tool. There is a place for it. But I can’t think of anything that really replaces in-person meetings. You miss that sense of collaboration that is so important to business if people aren’t in the office.
What will building owners have to provide in the future to make their office spaces more attractive to tenants?
Balsiger: Air quality is important today. People also want a higher level of cleanliness. We had been increasing our air-exchanges at properties before the pandemic. The pandemic, though, just made that even more important. Building automation will become more sophisticated. People don’t have to call in work orders today. They can use software to schedule those. You can make conference room reservations online. It’s that type of technology advancement that will continue to enhance the individual experience we offer.
Everything is going online. The pandemic really pushed this trend. People are more comfortable with that online engagement today. Whether it’s yoga classes or mixology classes, we do so many things online today. Prior to the pandemic, JLL introduced an entire business platform, called XM or Experience Management. It’s a concierge service that we can provide remotely. That used to be something property management personnel did from their desks. Building owners, though, recognize that if a concierge service is something that helps brings employees back to the building, they need to offer a concierge service on steroids. You need to offer these options to building tenants. It’s a ‘check-the-box’ item. That experience needs to be available to them. It’s no different than fitness centers were five years ago.
Wright: The Class-A spaces have the amenities that tenants are looking for. They have the amenity centers and the conference centers, the ability to plug in higher levels of technology. The buildings are run with smart systems. The mechanical systems are precise and they are reliable. The older buildings in Minneapolis, the Class-B and Class-C properties, are falling a little bit behind. They just don’t offer as many amenities as the Class-A buildings do.
The other thing that Class-A properties spend money on is security, the whole essence of keeping a building safe and secure for tenants and their employees. That is a very big issue. In Minneapolis, we were the start, the epicenter of the social unrest a couple of years ago. There is an onus now on building owners and managers to make sure buildings are safe and secure.
Another big thing in Minnesota is outdoor space. Do you have outdoor space that tenants can migrate to during the course of the day? Part of the conversation between property managers and owners is figuring out how to create good use of the outdoor space available in buildings.
What else has to happen to get more people back into the office?
Balsiger: It’s not just what the building is doing. It’s what the businesses are doing. Whether they are buying their employees lunch one day a week or offering a social event once a month. Maybe it’s flex scheduling. The businesses themselves must establish a new culture to not only recruit people but retain those people and bring them back into the office. In every business there are always going to be roles in which the individual can be effective working from home. But there are also a lot of roles where people need to be in the office and collaborating, whether you need to work together on a pitch or you are working on underwriting for a larger-scale construction project. Whatever your business is, there are certain functions where people can be effective from home and others where they need to be in the office.
What should business owners ask when looking for the right property management firm to partner with?
Wright: We get asked a lot of questions when talking to building owners. Some of the questions that are being asked today are not the ones that would have been asked 10 years ago. Owners today, for instance, should be asking about environmental and sustainability changes they can make. Those are highly important issues for many employees and tenants today. What can a property management firm do to help building owners improve the efficiency and environment of their buildings?
Owners should also ask property management companies about how much communication they will have with their building’s tenants. How much will the property managers interface with tenants on a daily, weekly or monthly basis? They should also ask property managers what they can do to be part of the solution for their tenants as they attempt to bring employees back to the office.
In every interview we have with building owners today, the environmental, sustainable and social governance questions and the questions about tenant engagement and retention are a focus.
Balsiger: It comes down to the culture of the property management organization they are looking to partner with. Do you want a partner or just a service provider? The more information a client shares with us about their goals for the asset, the more effectively we can act as a partner and not just a service provider. If clients are really open with us, we can do a better job of managing that asset for them.
For instance, if we know the client is going to be a short-term holder of a property, we might not dig into the back-end operations of the building so much. We won’t focus on those bigger details of running a building more efficiently. But other clients who say they want to hold onto a property for 10 to 15 years, we will focus on what we need to do to make it more efficient.
When I am pitching a client, I also commit to them. I tell them that if we assign a general manager to their building, that general manager will be with them for two to three years. If the client is a long-term holder, that general manager will be with them even longer. Having continuity in your management team is critical to being a cohesive rapport. And that is critical to a property’s success.