When leading a discussion on the shifting landscape of commercial real estate, Steve Weikal, head of industry relations for the MIT Center for Real Estate and a leading evangelist for the PropTech industry, often shares a quote by Chris Kelly, co-founder and former president of Convene: “What talent wants, landlords need, and developers must build.”
While the statement is aimed at the whole of the commercial real estate industry, it speaks directly to the increasing acceptance of tenant experience technology as a boon to the bottom line.
As landlords become more attuned to the idea that is essential for their tenants to create workplaces that will enable them to attract and retain talent, astute operators are responding in kind. But they are also coming to the realization that creating an employee experience that actually becomes a differentiator for companies goes far beyond just curating a suite of amenities. Which is why tenant experience platforms like HqO, Workwell and Equiem are creating such a buzz within commercial real estate.
Those firms are providing apps that enhance the tenant experience by connecting employees to amenities within the specific building, campus and surrounding neighborhood; supplying links and updates to local transportation modes; providing secure building access; and promoting community activities. The technology is designed to increase the level of employee satisfaction with their workspace, which enables companies to attract and retain their talent, and in turn helps landlords to attract and retain tenants and boost asset value and ROI.
The aforementioned firms are in accelerated growth mode, attracting significant investment dollars and forming partnerships with landlords with large portfolios. Boston-based HqO investors include JLL Spark, DivcoWest, Jamestown, and MetaProp, an NYC-based PropTech venture capital firm, and number Jamestown and National Development in Boston as early stage adopters of their platform. Workwell, based in France, began partnering with Hines in December, and Australia-based Equiem is working closely with Vornado Realty Trust and other owners in New York, Philadelphia and Houston. In addition, Tishman Speyer has gone the DIY route, launching ZO, their own proprietary tenant experience app, in seven core markets.
Weikal recently moderated a panel discussion hosted by NAIOP Massachusetts, “Attracting and Retaining Tenants with CRE Technology,” designed to give the CRE community a big picture view of the value of tenant experience platforms. The panel featured Evan Rosenburgh, the director of digital products sales at CBRE, whose real estate visualization startup Floored was acquired by CBRE two years ago; Mark Rosenthal, VP of “marketing, sales and success” at HqO, who was lured from Google in November; and Leah Harsfield, asset manager for National Development, which owns and operates The District, a 1.3 million square-foot, mixed-use development comprised of office, retail, restaurants, and open space, 20 minutes outside of Boston. The District began implementing the HqO app approximately one year ago.
Harsfield says that a good portion of her job as an asset manager has evolved into helping the CEOs of tenant companies “get the best people and make sure they stay there. So we’re navigating how to create that experience for the talent in their daily life,” she says. “It’s (odd) to think that that’s on the landlord, but it absolutely is.”
Harsfield says that the constituencies of the teams making up prospecting tours for new space has changed dramatically in recent years. Where in the past that group may have consisted of the CEO and finance personnel (or the corporate real estate manager in a larger firm), the end users – the employees – are now well represented and are much more involved in decision-making process, starting from day one. “And that really gets to the core of how companies are evaluating and thinking about their employees,” says Harsfield. “So as a landlord, you really need to tailor your pitch and (structure) your thinking to make sure you’re really speaking to the end user, which is the employee.”
The change in thinking has largely been driven by the effect that co-working has had on workplace culture, says Rosenburgh, “Brandon Webber (of Accenture) said we need to change from a tenant mentality to a customer mentality, because (employees) are the ultimate customer.” He noted that not only are the people on the tours for new space different, but it’s the level of involvement from everybody on those tours that has changed, with meetings and focus groups typically following tours. “And the mechanisms that happen on a tour are just so much different than just talking about the HVAC and building systems, and more so about the buzzwords that everyone is hearing: workplace strategy, collaboration, environment, and retention.”
Rosenthal says that HqO provides value to landlords and the entire industry in three principal ways, with the first and most obvious being “to enable a great tenant experience through software. Taking all the great stuff that (landlords) are doing on their properties and adding the software layer on top of that to make it easier for tenants and their employees to engage with.” The second is to help landlords to amass data that will enable them to make data-driven decisions about their assets and portfolios, on items such as amenity procurement, tenant curation and mix, and retail and leasing decisions. And last – and ultimately the most important aspect for building owners – to drive asset value and NOI, either through increasing efficiencies or allowing landlords to generate new revenue streams through the use of that data.
Rosenthal believes there is a “huge market for buildings like as this one (60 State St., a Class A, 900,000 square-foot office tower in Boston, where the presentation was held), which are multi-tenanted and well-amenitized in the building itself or in the surrounding neighborhood, where we could create a better experience for ALL of the tenants in the building, and help the landlords create more value.”
Because tenant experience software is still a relatively new product with a small sample size, there is not enough quantifiable data to effectively determine its impact on ROI. However, Harsfield was able to provide an anecdotal experience using one of her tenants, a tech company that has grown significantly since coming to The District. “They came here, started with 10 employees and have now grown to 50. And now they have all this talent that likes being here, and they’ve got the HqO tenant experience software and they’re getting free perks all around the campus. And if you take that group of 50 people and put them in B-minus office space where they have none of it… (it’s not going to work for them). So tenants decide to pay a little premium to have a full experience, not just office space with four walls.”
While panelists agree that tenant engagement software is still in its infancy, there is little doubt that it will continue to gain traction. “Whether property owners decide to do this with homegrown solutions developed in-house (like Tishman Speyer) or with a third-party provider, this trend will continue to grow,” says Weikal. “Equiem, HqO, Workwell and a couple of other companies are landing pretty significant engagements with major industry players, so this trend is definitely going to move faster and faster.”
