Mind Reading

What Corporate Tenants Want

By Paul Rosta on Dec 6, 2013 in News

A growing number of corporate tenants today are thinking of their real estate as more than just a place to house their employees. Instead, they’re treating it like an asset. That is borne out in a recent study of office occupiers by CoreNet Global. In all, 68 percent of respondents reported having a workplace strategy in place. And about 45 percent of participating companies termed their workplace strategy “mission critical” and “discussed and debated at the C-suite level.” On a related note, about 59 percent said that they have implemented an energy efficiency plan.

Few goals are higher on office users’ lists than efficiency, but a holdover from the recession can get in the way. In the short run, the “blend and extend” approach to renewals helped many tenants and owners survive the crisis. However, it also enabled all parties to skirt the core issue of how much space they actually need. When CoreNet Global surveyed its corporate partners, it found that 50 percent of respondents reported an imbalance among the size of their workforce, unoccupied space and the company’s growth rate. Another 36 percent reported cost pressures as a continuing issue, and 40 percent said they would be willing to move to higher-quality space that is better suited to the company’s needs.

The factors that influence tenant leasing choices run the gamut, with the most important associated with lease terms, ownership and property management. In a recent survey conducted by the Building Owners and Managers Association International and Kingsley Associates, 90 percent of tenants named pricing as “very important” or “important.” But 80 percent or more cited building security, parking, the landlord’s financial stability and the owner’s reputation for customer service. And at least 76 percent named factors related to lease provisions: length of the lease, tenant improvements and flexibility.

Once the tenant moves in, management of the property is crucial. Asked to rank 18 different factors for their effect on satisfaction, tenants in the BOMA International/Kingsley survey gave property management a 0.78 correlation to satisfaction—the highest of any item. Results related to amenities may be more surprising. Even when common features like parking, restaurants or fitness centers get high grades, those ratings do not necessarily add up to a satisfied customer. This suggests that some amenities eventually become commoditized and may even be oversold. “You really have to ask yourself how often you use these things,” advises Frank McCafferty, a Dallas-based senior managing director with Cassidy Turley. “They get utilized, but they never really get utilized to the degree that you’d hoped.”

At least one area cited as offering room for improvement may come as a surprise: “Health and hygiene”—a phrase that tenants were permitted to define for themselves—earned a high 0.67 correlation with tenant satisfaction. Yet the overall grade was only 3.7 out of a possible 5, noticeably lower than related categories.

Whatever concerns occupants may harbor, though, the good news is that most generally seem to like where they are. On a scale of 1 to 5, respondents to the BOMA-Kingsley study gave their current location a cumulative score of 4.1, equivalent to a rating of “good.” That was comparable to results for Canada and outpaced the scores awarded in New Zealand (3.9) and South Africa (3.4).

Keep up the good work!

Paul Rosta is senior editor for Commercial Property Executive. For further discussion of tenant preferences, turn to “What Tenants Want” in the September 2013 issue of CPE.