Is 2023 the year companies fully bring people back to the office? According to research from McKinsey, 87% of people want flexible options that allow them to work in an office and virtually, such as a hybrid work model. Yet, 50% of companies want workers back in office five days a week, according to Microsoft research. That’s leading to some interesting commercial office trends for 2023.
While companies and their employees seem to be at odds – something a recent Forbes article labeled “The Great Mismatch” – signs are pointing to a return to office in 2023. A couple interesting highlights from the article, based on research from Adzuna (which conducted year-over-year analysis of advertised job vacancies across the United States), include:
- Since summer 2022, many companies have become firmer on mandatory return-to-office policies, and the proportion of roles specifying they are “office-based” has risen to a 19-month high of 4.2%.
- The proportion of job vacancies labeled “remote” has slipped to a 10-month low of 13.8%.
2023 State of the Commercial Office
No matter when companies fully return to the office, commercial real estate (CRE) property teams are facing new challenges as the workplace continues to shift. And remote and hybrid work models are just one part of the story. Commercial office property teams are also dealing with strain from labor shortage, a new focus on ESG reporting and sustainability initiatives, and everything in between. Simply put, commercial office property teams have more to figure out than ever before.
To shine light on what CRE property teams are focusing on as they face a rapidly changing industry, Building Engines, a JLL company, partnered with the Building Owners and Managers Association International (BOMA) to survey commercial property professionals about the state of CRE building operations. Respondents answered questions about their current portfolios and their expectations for building operations in the year ahead.
This blog answers the top five questions on commercial office property teams’ minds this year. Read on for top insights and commercial office trends from the 2023 State of Commercial Office Report.
Is Hybrid Work the New Norm?
According to the research, 89% of CRE teams in the commercial office sector say that at least some of their tenants have adopted a hybrid work model (defined as employees splitting time between the office and working from home).
The shifting workplace is putting some strain on commercial office property teams when it comes to effective tenant engagement. And it means property teams may need to reevaluate their tenant experience strategies.
“Over the last few years, we have seen an evolution really reach its apex. Where now, every individual that walks into a space is part of an echo chamber that’s helping make the decision for a tenant’s ultimate leasing renewal or expansion. The importance, the criticality of property manager’s customer service, and the focus on customer experience, is important in a way that it hasn’t been before,” Randy Fink, Managing Director, Property & Asset Management, JLL, said during a recent webinar, “What’s in Store for CRE Building Operations in 2023.”
As property teams examine emerging commercial office trends in 2023, it’s important that tenant experience remains front and center. Think: What improvements can you make to provide a better experience for tenants – ones that make them want to commute to your buildings?
What Do Commercial Tenants Want from Buildings?
With that said, improving tenant satisfaction is a top priority for commercial office property teams as the workplace continues to evolve – whether hybrid work is the new norm or a full return to office is in store for 2023.
For the commercial office sector, it might be intuitive to think that many property teams are facing tenants requesting shorter or more flexible leases. However, our research shows that’s not necessarily the case. In fact, CRE property teams said that change to leases was at the bottom of the list of tenant requests.
However, if the workplace continues to shift to a new norm of remote and hybrid work, that may not always be the case. Again, that’s why focusing on the tenant experience will be key in 2023 and beyond. And, according to our research, commercial office property teams would do well to start by amping up building operations to focus on tenant comfort – even simple things like temperature – as 70% of respondents say it’s the most common tenant request they receive.
Accelerated by the pandemic, employees also want to work in healthy spaces. Commercial office property teams can lean in here, making sure buildings have good indoor air quality, for one. Tying the two together, commercial office owners might consider adding health and wellness amenities, such as new fitness centers or healthy food options.
Will Amenities Get Tenants Back to CRE Buildings?
Many CRE companies are spending a lot on adding amenities to their properties to get people excited about coming back to buildings. It’s all about making their buildings commute worthy.
We asked commercial office teams whether they had plans to add new amenities to their buildings over the next few years. Over half said either no (27%) or they weren’t sure (27%). However, 46% said they plan to add amenities.
It might behoove the 54% of commercial office teams who don’t have amenities on their radar to start rethinking how they can utilize their buildings – especially as workplaces continue to change and space is freed up due to potential shrinking leases or diminished lease renewal rates.
How to Know What Amenities Are Worth the Investment?
Adding amenities to buildings can be an expensive endeavor. Just look to Blackstone, which spent $500 million last year to renovate and add 250,000 square feet of public amenities at its Willis Tower in downtown Chicago in an effort to attract tenants and locals to its office building.
So, the question becomes: How do I know my investment will pay off?
Drawing conclusions from the tenant data you have at your fingertips is a great place to start. If you use a tenant experience app, you have access to information that can guide your business decisions.
“With tenant experience apps you are going to be able to infer a lot about, do [tenants] like the amenities? Do they not? You are going to have a lot of data to make decisions around,” Tim Curran, Executive Managing Director, Property & Asset Management Technologies, Building Engines/JLL Technologies, said during the webinar, “What’s in Store for CRE Building Operations in 2023.”
“It’s not an annual survey that we are used to doing in our industry; it’s a more continuous survey that you can do, and you should be doing to really keep a pulse on what’s going on. Again, always trying to make that building commute worthy depending on what’s happening,” he said.
Note: To get inspiration on what amenities your peers are adding to office buildings across the board, check out the free report 2023 State of Commercial Office Report and head to Chapter 3.
Is There a Way to Measure if a Building is Commute Worthy?
To determine whether your building is commute worthy, you’ll need to ask the people who commute to your property. Property teams who don’t have a solid tenant engagement strategy could be left behind this year. And research from the 2023 State of Commercial Office Report shows that many property teams are missing an opportunity to engage with tenants in meaningful ways.
When we asked whether they are using tenant survey or polling data to help guide business decisions, the majority of commercial office property teams said no (48%), or they weren’t sure (13%). Fewer than half of respondents answered yes (39%).
For property teams who use technology, such as a tenant experience app, they find that every event registration, booked resource, and tenant survey sheds light on what tenants’ love – and what they don’t. That gives them valuable data to make smarter business decisions, ensuring investments are made where they’ll see a return. Commercial office property teams can use this real-time data to remain proactive about office programs and amenities. Tapping into the data can help property teams make better business decisions – something that would be helpful for at least 61% of the CRE professionals who responded to this survey.
Discover More Commercial Office Trends for 2023
It’s clear commercial office property teams face some new challenges as the workplace continues to evolve. As inflation remains unstable and the world braces itself for a potential recession, companies are looking to cut costs where possible. Because the workplace has adopted remote and hybrid work, office lease renewals could be at risk.
CRE teams in the commercial office space need more help than ever before with tackling issues head-on. A focus on streamlined building operations, tenant experience, and sustainability will be key drivers of success in tackling looming challenges.
Download the free report 2023 State of Commercial Office Report for more valuable insights about emerging commercial office trends in 2023.
