Archives for April 2019

Landlords Embracing Tenant Experience to Attract & Retain Tenants
As the war for talent rages on, companies are increasingly using their real estate as a tool to attract and retain the best and brightest employees. Following the lead of WeWork and other coworking operators, commercial tenants are now adopting a far more employee-centric approach to creating and cultivating their work environments. As a result, landlords are striving to find the right combination of amenities, social programming, and technology to create a tenant experience that will give them an edge over their market competitors in attracting and retaining these forward-thinking tenants. “One of the biggest drivers in real estate right now is the HR component,” says Grant Pruitt, SIOR, president and managing director of Dallas-based Whitebox Real Estate. “When recruiting and retaining employees, the question becomes, ‘how can we differentiate ourselves?’ And while that goes beyond the real estate piece, creating an enhanced tenant experience can be an inexpensive way for them to do that.”
Pruitt points out that real estate costs, even for highly amenitized buildings in expensive markets like New York and San Francisco, are minimal compared to the costs of hiring and retaining talent—a factor that is far more critical to the overall profitability of a company. “So they’re going to make sure that the space that these people go to is a place that they’re excited about going to.” Landlords are becoming more attuned to that reality. During a panel discussion at last year’s Urban Land Institute (ULI) Boston Spring Summit, Sam Schaefer, managing director at Tishman Speyer—which owns and operates over 100 million square feet of premier office space around the globe—told the audience, “Right now, what we’re thinking about is enhancing the experience in our buildings, and that’s a big strategic and cultural shift that I’ve recognized at Tishman Speyer.” Last year, the firm expanded Zo, a pilot program which offers a suite of amenities and services for tenants and tenant employees, to seven core U.S. markets. He added that, while it is expensive to do so, “At the end of the day, if we’re able to retain our tenants and do business with the min multiple markets, then it’s a relatively cheap investment. ”Chase Gabarino, CEO of HqO, a tenant experience platform that helps landlords optimize their properties by improving the employee experience, says that in recent years, there’s been a growing understanding among companies—both large and small—that a positive office experience and the sense of community that employees get while at work is vital to recruiting and retention. “So landlords are putting a lot more resources and focus into their amenities in order to become a place that allows their tenants to attract talent,” says Gabarino. HqO has created a tenant experience scorecard for landlords to help improve their property through amenities, experiences, and technology. This scorecard focuses on six key elements:

1. Mobility – How accessible is the property to tenants traveling to and from work every day, including walkability, shuttle and transit options, as well as alternative forms of transportation?
2. Convenience – Is the property set up to streamline a tenant’s day by including amenities such as on-site daycare, dry cleaning, conference room booking, grab-and-go food options, etc. If the property does not have those amenities or capabilities on-site, how can it bring those services to tenants via technology?
3. Wellness – How “amenitized” is the property in terms of promoting and supporting the tenant community’s interest in health, wellness, and fitness initiatives, either with on-site facilities and offerings or nearby on-demand services?
4. Security – Is the property set up to facilitate and distribute security protocols, notifications, procedures, and contingency planning? Are tenants and visitors given appropriate access?
5. Entertainment – Are onsite and neighborhood events available, discoverable, and promoted to the tenant community?
6. Sustainability – Is the facility set up with sustainable HVAC and lighting controls? How well does the property team identify, promote, and organize charitable fundraising events and corporate social good content from tenants?

Tripp Guin, SIOR, owner and principal of TRIPP Commercial in Charlotte, N.C., specializes in tenant representation and confirms that landlords are now curating amenity packages that closely align with the HqO scorecard. But for his suburban clients, there is another vital component to the tenant experience— the walkability that comes with the downtown office experience. “That’s probably the biggest change that I’ve seen in recent years in terms of what tenants want to have for their employees,” says Guin. He recently showed several spaces with enhanced amenity packages to a prospective tenant, but each lacked walkable open space. He was able to deliver a home run for his client when he located an office with state-of-the art workout facilities, food trucks five days a week, and laundry and food drop-offs in the lobby—in an office park that also offered restaurants and services within walking distance to the office. “The landlord was able to provide the ‘cool factor’ amenities so the client could hire and keep his people, but the walkability factor sealed the deal.” While amenities are the cornerstone of an enhanced tenant experience, a survey of over 300 office workers across 10 major metropolitan areas conducted by HqO, titled “The State of PropTech: Connected Tenants and Disconnected Landlords,” found that 74 percent of employees are unsatisfied with the amenities that were available in their building. Even more telling was that the study found that most tenants were unaware of the full range of amenities offered—even in premier buildings— because, as Gabarino says, current methods of making tenants aware of amenities and activities (emails, flyers, word-of-mouth) are largely ineffective. “And that represents a breakdown between the owners and the people that are actually using their property every day,” he shares. “So what you need is tenant experience technology to bring the whole amenity and services package together.”
And that’s where HqO and other tenant experience platforms, such as Equiem and Workwell, come in—digitally connecting tenants to amenities, services, and building operators. As more and more people, particularly digital natives like millennials (who will constitute 75 percent of the global workforce by 2025, according to Deloitte’s 2014 Millennial Survey) and Gen Z’ers, use smart phones as their primary mode of conducting their social and business functions—from dating, to ordering food and Uber rides, to paying bills—it is only logical that their work life must also be fully tech-enabled. Large-scale real estate companies are realizing this and have begun investing in tenant experience technology. JLL Spark and the Pritzker Group have invested in HqO, and companies like Jamestown, …74 percent of employees are unsatisfied with the amenities that were available in their building.” 12 | SIOR Report As more and more people, particularly digital natives like millennials…and Gen Z’ers use smart phones as their primary mode of conducting their social and business functions…it is only logical that their work life must also be fully tech-enabled.” DivcoWest, and National Development are early adopters. Workwell recently began partnering with Hines, and Australia-based Equiem is working closely with Vornado Realty Trust and other property owners. The HqO mobile app provides a connected tenant experience through four primary features:

1. Control – which allows users mobile access to the building, parking facilities, fitness centers, etc.;
2. Community – which connects users with other tenants and property managers, alerting them to tenant experience activities, such as happy hours, BBQs, onsite yoga classes, and volunteering opportunities;
3. Content – providing all relevant information about the property, including transit data, alerts to promotions by restaurant and retail partners, and security procedures; and
4. Commerce – which allows users to pay for services or memberships from outside partners via the app.

“What the technology does is make our amenities and events programming more accessible to the 3,000 to 4,000 people who work at The District by bringing it all together with one app,” says Leah Harsfield, asset manager for National Development, which owns and operates The District, a walkable 1.3 million square foot mixed-use development comprised of office, retail, restaurants, and open space, located 20 minutes outside of Boston. In the past, she says, an email announcing tenant experience programming would be sent to the individual companies, which may or may not be effectively communicated to the employees. “So HqO provides a way to break through and get directly to the end user: the employee.” HqO and other tenant engagement platforms also serve in a quasi-advisory role by providing landlords with data that helps them to determine which amenities are most important to the tenants, and to see what the properties may be lacking. With their ability to partner with outside vendors that can provide food, wellness options, and “second-shift” services, HqO can help landlords “onboard” a tenant experience without investing additional capital into their properties. Harsfield says the response from the 30-plus CEOs and CFOs she works with at The District has been overwhelmingly positive. “Many of these companies don’t have the dedicated resources to create culture and community on their own, so for them to be able to outsource that to the landlord is a huge plus,” she says. “And we truly believe as a landlord and an owner, if you’re not positioning yourself to create that experience for your client, you’re A.) probably not going to be leasing as much space, and B.) you certainly will not to be able to justify rents that are at the top of the market.”
By: Michael Hoban (SIOR Report)
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Thanks to all of the brokers, sponsors, and guests who attended the April 2019 CCIM NM Deal Making Session & Forum and to those who shared the April 2019 CCIM NM Properties.

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It’s an exciting time for the Real Estate industry. While the benefits of AI and Machine Learning are well acknowledged across dozens of verticals, CRE has traditionally been a few steps behind in terms of digital transformation. According to the Forbes Real Estate Council, this is all about to change, as traditional business models are usurped by the newest innovation and smart technology.

Commercial real estate [stakeholders] who are open to new methods and who evolve with the latest disruptive technologies should remain market leaders. Innovation will often produce very good results if you’re willing to embrace it. If not, you are likely to be left behind.

These disruptive technologies are diverse, and include brokers using software to give potential tenants 3D tours of their properties in advance, or chatbots that can negotiate a fair deal for a property with a tenant directly. In particular, the use of Data Analytics and Machine Learning is changing the way that many CRE businesses operate, allowing stakeholders to act with certainty rather than guesswork.
How Can I Benefit from a Predictive Model?

• On a basic level, businesses are now able to answer many of the questions that were traditionally complex or impossible to answer using manual analytics. Traditionally, a client who wants to know how they are measuring up in terms of tenant renewal may have been able to find some Open Data on the topic, or loosely compare themselves to the market more widely. With a room full of engineers and months of sifting through datasets, manual analytics will never be able to accomplish what a well-trained AI model can achieve at the click of a button. Comparisons with industry or market averages are just the beginning. With Machine Learning technology, businesses can understand past mistakes using root cause analysis, recognize what’s happening in real-time, and even look to the future to make accurate predictions about what will
  happen next.
• The first hurdle for many companies is recognizing that the data you need is likely to be already in your possession. Despite popular belief, you don’t need thousands or hundreds of thousands of datasets in order to benefit from Machine Learning algorithms. In fact, a few hundred is enough to start gleaning information from. At Okapi, we take the customer data and then enrich it further with third-party information from disparate sources. This could be market information, social media, governmental data or more. By giving the computer this data, we can train it to learn which features are predictive features, and which factors really make a difference.
• Identifying which variables are significant can have a powerful effect on your business strategy. Let’s say for example that you are a landlord who puts a lot of your messaging and branding behind keeping your price point low. You pride yourself on being affordable and you believe that this is what keeps your tenants loyal and happy. Through our predictive model, this gut feeling can be either reinforced, or debunked. Underneath your instinct, it could be that the classification of the building, its attributes or location are actually what encourages your tenants to renew their leases time and time again. Raising your price, and thereby your bottom line, might not cause as much change as you fear, and your empty units could be filled by focusing on the real variables that make a difference. For the first time, CRE will have answers to the questions that make a real difference to business optimization. It’s no surprise that the Deloitte 2019 CRE Industry Outlook report proves more than 80% of stakeholders believe that predictive analytics and business intelligence should be a priority for CRE. In fact,

over the next 18 months, nearly two-fifths [of companies] plan to increase the use of these two technologies in their business decisions.

How Can I Be Sure it’s Reliable?
Training a model is a long process. By testing enough variations of existing data, we know that new information will fit seamlessly and accurately into the model that we have created. This needs to cover multiple datasets and types of information. Take a company that leases 10,000 buildings for example.
We build our predictive model able to handle multiple types of data and give accurate results without adding complexity. Our goal is to take the noise of all this data, and turn it down so you can hear the music underneath. By paring it back and extracting only the relevant actionable insights, you have widely applicable information to use in your unique business context.
In order to do this, we use simulations. By taking the data from 2016-2017 for example, we can enrich this, and predict what will happen in 2017-2018. We can then check the results against the real-life data from 2017-2018, and measure how accurate our model is compared to what actually happened in that year. In this way, we get a good level of assurance that when the machine says something is going to happen at a high level, it will.
Defining your Questions from a Business Perspective

• The capabilities of Machine Learning and AI for your company will depend heavily on the questions you are looking to answer, and the outcomes you want as a business. These are not always one and the same.
• Often, a client might approach us wanting to know whether they can raise rental prices without losing tenants. This is the question they want to answer. Underneath that question is the outcome they are looking for – most likely to increase their profit margin. Using Machine Learning we can look at meeting the outcome in the best way possible. This may well be to raise rental prices, but it could also be to reduce maintenance costs or to streamline operations behind the scenes.
• Using our Root Cause algorithm, we can also learn from existing data to understand why an event occurred. Let’s say that in 2016, 75% of leases were renewed, while in 2017, this fell to just 60%. We can tell you why. Understanding how and where you performed badly as a business can help you recognize where you should be focusing your attention, and which parameters affect performance overall. These actionable insights give you a good sense of changes you should be making as a business, such as shifting maintenance from one place to another, or what specific groups you are not speaking to effectively at the moment.

Where Else Can AI Make a Difference?
Tenant renewals are a great focus point for understanding how AI can revolutionize your business process, but they are far from the only benefit. Our powerful algorithms provide a competitive advantage across the board.
Predictive Maintenance
Managers can now stay two steps ahead, with alerts into the machines and systems that are about to fail. Enriched data through building sensors, similar machines, and even the amount of people using the equipment takes you out of crisis mode, for good.
Resource Management
You can plan ahead with the right teams at the right time for maintenance, cleaning, supplies and more. Never overspend preparing for a doomsday scenario that doesn’t arrive, and don’t allow yourself to be caught short without sufficient workforce for the load.
Vendor Relationships
By establishing accurate benchmarks, you know exactly what vendors are essential to your bottom line. Identifying trends can give you new ways to partner with relevant suppliers and resources, building your network within the industry.
Cashflow Planning
Monitor and track customer behavior, allowing you to predict who will pay on time and who won’t. With insight into cashflow problems before they become a reality, you can prepare in advance and make smart financial decisions for your business overall.
By: OKAPI (Globe St.)
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