The future of the “increasingly complex office market” depends largely on how companies address evolving employee expectations and workplace demands, according to a new JLL Research report.
In 2024, hybrid work schedules remain very popular among the workforce, with flexibility a top priority for employees. Employees also favor an office space that is highly amenitized and caters to their specific workplace needs.
It is clear that many companies are listening to their workers, as prime office buildings — those that are within the top 5% of their market’s age and possessing design, amenity and location advantages — have significantly lower vacancy rates, 14.8%, compared to the national rate of 19.4%.
Nevertheless, an estimated 60% of office buildings may still require updates to maintain relevance in the market.
The question then becomes: What will be the key to attracting and retaining tenants in the future? How will tenant demands continue to evolve?
To alleviate market struggles and get workers back to the office, companies across the country are making plans to ensure their businesses are ready for whatever the future may have in store. Their priorities include growing revenues and attracting talent.
Commercial real estate experts are helping investors and owners align with these goals by fine-tuning the office experience according to the needs and wishes of current and prospective tenants. To find out more about what the future of office may look like, and how these goals can be seamlessly achieved, Bisnow spoke with some of the nation’s leading commercial real estate companies, including JLL, BXP and Shvo. Below is an edited selection of their answers.
Tyler Kethcart, Director Of Experience Management, JLL Property Management
Kethcart said demand is shifting from a flight to quality to a flight to experience. Tenants want physical spaces that excite employees, make them feel energized and, most of all, address their needs.
“Employers are being challenged to convince employees to come into work as opposed to working from home, where they may have gotten comfortable,” he said.
Kethcart also sees a trickle-down impact from how tenants used space during the pandemic.
“In the years following the pandemic, there's been some reduction in how much space tenants are consuming,” he said. “Certain features are either being reduced in size or, because of those reductions, they're going to be short on space, potentially. As employees return, there is an opportunity for landlords to fill that gap, specifically with conference and meeting spaces.”
In these meeting spaces, building owners should prioritize a multimodal design with modular walls, flexible furniture, intuitive technology, outdoor spaces close by and an elevated aesthetic. Having a concierge to take care of reservations and ensure consistent communication for event planning and day-of support is crucial. These are areas that JLL is seeing the highest demand for, he said. The firm expects this trend to continue as more people continue to return to the office and tenants need to make space for them.
Michael Shvo, Chairman And CEO, Shvo
Shvo expects the lines between home and the office to continue to blur, further validating the approach it implemented years ago across its portfolio: offering the same caliber of design and service at its office properties as it does at its luxury residential properties.
“Increasingly, people are seeking exceptional services and culture-defining experiences, especially when these can be provided at iconic properties in the most sought-after locations in the world,” he said. “There is a clear flight to quality, and we’re seeing that in the leasing demand and volumes for properties such as these.”
Rob Naso, Managing Partner And Head Of U.S. Asset Management, BGO
To stay competitive in this changing landscape, landlords should invest in tenant amenities, which play a vital role in crafting appealing office environments that attract, and subsequently retain, employees, Naso said. This extends beyond the mere functionality of a workplace and adds value by elevating comfort, convenience and overall employee experience.
“We have invested significant capital to renovate lobbies and deliver amenity centers designed by best-in-class design and architecture firms, such as Gensler,” Naso said. “However, it's not just about elevated amenities, it’s about delivering an elevated hospitality experience. We take this very seriously and provide specialized training for all tenant-facing staff. We believe the Bank of America lease at Newport Tower, the largest deal in New Jersey in a decade, is a nice stamp of approval that our efforts to date resonate with what tenants need and want for their employees, especially from an amenity and retail perspective.”
Sustainability and eco-consciousness also rank highly on the list of priorities for employees who seek workplaces that align with their values and have a positive impact on the environment, Naso added.
“We have a dedicated ESG team to ensure we are delivering the environmentally and socially responsible measures that are important to tenants and investors, but also impact the long-term financial and operational resiliency of the asset,” he said. “ESG is not just a buzzword. It is a core competency at BGO that is integrated into every facet of our business. It’s also an important differentiator as investor requirements increase. We place an emphasis on certifications such as LEED, WELL and Fitwel, and our properties are often awarded for their commitment to sustainability.”
Jeff Eckert, President Of U.S. Agency Leasing, JLL
Moving forward, the best office spaces in the most sought-after locations will continue to thrive, with rents across the top of the market remaining high and vacancy low, Eckert said.
“Companies are looking to their offices to help them recruit and retain talent, and they are finding the most success in the highest-quality assets in buzzing mixed-use environments,” he said. “As these locations fill up, and with very limited new construction beginning across the country, we will see spillover into those next-tier assets. Obsolescent offices will need to be repurposed or demolished to serve a better use, which is something we've already started to see, given overall inventory declined by 1.6M SF in the first quarter for the first time on record.”
Hilary Spann, Executive Vice President, New York Region, BXP
When it comes to creating a premier, in-demand workplace, thoughtful design and on-site amenities that promote a productive lifestyle for clients are essential components to success, Spann said.
“Today’s office workers want more than just a desk. They want workplaces that encourage convenience, efficiency and collaboration,” she said.
Spann’s firm expects a continuing bifurcation in the office market as premier workplaces outperform older, unrenovated buildings.
“The desire for unique amenities, sustainable buildings, access to major transportation hubs and a lively surrounding neighborhood will continue to prevail with today's office workers,” Spann said.
Caroline Gadaleta, Executive Managing Director, Property Management, JLL
Flexible, well-designed spaces and amenities will become the norm rather than the exception as people seek effortless convenience during the workday, Gadaleta predicted.
“We will see an increase in concierge-like services for things like dry cleaning to get that suit ready for an important meeting, reservations for top restaurants, or grocery and laundry deliveries,” she said. “In order to compete with home offices, the workplace will need to provide similar conveniences and amenities.”
She added that JLL continues to see increased deployment of building applications that provide tenants with everything they need for a day at the office.
“They can book amenities, pay bills, request an elevator, order lunch or find out what events are on in the lobby,” she said. “Today’s younger workforce has grown up with technology, and that is how we will get them engaged in the built environment.”
Because the pandemic brought building access control to the forefront of tenants' minds, many are now seeking a “touchless” entry environment, she said. But the industry is a long way away from biometrics and similar technologies.
“Any information that goes into the building access control system is connected to the internet, and many people are risk-averse,” she said. “They want to know where that data is going, who’s controlling that data, who is reading their fingerprints or listening to their voice. We are seeing an increased use of QR codes that provide seamless access, and I think they will become more common in the next few years.”
Andrew Wiener, Head Of Commercial Office Leasing, The Feil Organization
One primary trend that will continue to dominate the industry moving forward is owners reinvesting in their buildings to reposition them to meet market and tenant demands, Wiener said.
The majority of office stock isn't brand-new construction, and repositioning goes beyond amenity centers and floor-to-ceiling glass windows, he added.
“Our repositioning efforts focus on making sure we’re providing unique opportunities for tenants, including building-within-a-building concepts, private entrances and access to branding opportunities,” he said. “Additionally, we curate our retail tenant roster, as each retail user has an outsized impact on the tenant's day-to-day needs.”
Another trend shaping the market is that today's tenants want to be on top of or adjacent to mass transit.
“As a result, we continue to see high leasing volume in our well-located buildings, particularly those near Grand Central and Penn Station, along with NYC’s major subway stations,” he said.
Jamil Lacourt, Chief Operating Officer, L&L Holding Co.
There’s a new openness and appetite to tap into technology so that buildings can operate more efficiently and sustainably, Lacourt said. In the future, cutting-edge artificial intelligence will play a larger role in advancing these efforts.
“As more lenders find themselves in ownership positions on distressed assets, they will look to partner with vertically integrated real estate companies like L&L to revitalize and even transform their properties for the next generation of office users,” he said. “Given our track record for redeveloping and repositioning dated environments, we are adept at finding and executing on cost-effective ways to unlock significant additional value.”
This article was produced in collaboration between JLL and Studio B. Bisnow news staff was not involved in the production of this content.
Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.
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