Cultural shifts needed to propel CRE forward
We’re just about to hit the tipping point—consumer demands in commercial real estate have changed causing company demands to change, and with this comes a shift in company culture. Whether through co-working, experimenting with utilization or technology, new ideas are taking shape. The first step to fostering this cultural transformation starts at the top.
Hire the David Bowie of executives
Or the Lady Gaga, or the Madonna. Hire the executive that has a fervor for innovation and a willingness to take risks and learn from the outcomes. Choose the asset manager that is forward-thinking and tech savvy and give them an opportunity to identify areas for improvement. Once you have the right person in place you’ll be ready to get started.
Select one aspect of the business to improve; maybe it’s a new technology, or a change in office space. Ensure you have the criteria for success and resources in place. Experimentation is key. Not only for your space, but for your company’s culture and your workforce. And, don’t let failure dissuade you from experimenting. Turn the mistakes into key learnings and apply them to the next project.
Commercial real estate can look to finance and media companies for inspiration; they are starting to test the waters. For example, Bloomberg News has been around for decades, but their culture isn’t stogy and archaic. Employees walk through an atrium when they enter the building, and each day at 2:30 p.m. is tea time. It’s an unspoken rule that meetings aren’t held during the half hour break for desserts and tea. And while this break is a time for infusing tea leaves, it also infuses fun and whimsy into the culture at Bloomberg News.
All this to say workplace happiness is another factor of success. There’s high competition for talent as the unemployment rate is currently the lowest it’s been since the 1960s. Prospective candidates have the luxury of taking their time to find the right fit for their next career move. And, they look for a company where they see a cultural fit. They want to know they’ll enjoy coming to work and the company’s values align with their own.
So, how can commercial real estate companies apply these learnings? First, it’s important to understand there’s a generational shift starting to take place. Though CRE tends to be risk-averse and data-driven, what was commonplace in the last 30 years will not happen in the next 30. The industry is starting to shift to accommodate new technology and leadership. There are also new people entering the commercial real estate space. These changes will inherently propel the industry forward, but it’s crucial to have an open mind about what’s to come.
Flexible space isn't just a fad
This is a shift taking the industry by storm; shared spaces where employees of different companies spend their days have become commonplace. It’s notable this is a global trend; we’re seeing this shift in the states, but also in cities across the world including London and Hong Kong. Traditionally, the key metric for asset managers was occupancy rate. Now, they’re turning away from occupancy and focusing on utilization rate.
This metric enables asset managers to see how much of their space is available and creates opportunity for filling space in the short-term. Companies that adopt this mindset and are willing to experiment with their space will see success and having the right leadership in place is key. We’re seeing turnover in executives as they’re replaced with agile leaders who are willing to take risks in how their space is utilized. A recent example comes from Boston Properties. They had excess retail space and as an experiment transformed it into a co-working space. It was a huge success and this out-of-the-box idea from James Whalen, SVP/Chief Information and Technology Officer, turned into a new initiative for the company: they’re starting to invest more into co-working and retail. Short-term solutions to fill space can be a great option; consider subleasing, facilitating project bursts, accommodating remote workers or hosting events. The shared economy is prevalent in other industries as well, as evidenced by the ubiquity of Uber and Lyft. What started as a way to share rides with nearby passengers has evolved into a mode of transportation and spurred new business lines within the companies—talk about innovation!
The next wave of change is here
Traditionally, commercial real estate is not an industry where data and insights are shared. There’s a cloak of opacity that seemingly protects companies from their competition, but it’s hindering growth and advancement of the industry. There needs to be a willingness to share data and embrace a more transparent culture. In residential real estate consumers put pressure on the industry by requesting online listings and up-to-the-minute information, resulting in transparency. Redfin, Zillow and Trulia were born from necessity to meet these demands.
But, CRE companies are on different timelines when it comes to adopting to change and cultural shifts. In broad terms, the areas that are still under-served are the ones that will be more open to change. More specifically, there’s a large opportunity within buying and selling. Currently, information is siloed, but transparency is growing as information is being publicized and machines are providing insights and enabling investors to make better decisions. We’re in the era of more information being collected, and there’s an opportunity to change how it’s accessed and utilized.
Take, for example, Jones. The company was convinced their certificate of insurance process was the best it could be, but they decided to test automation. Between two larger companies they found that 10 hours of the property manager’s time was freed up—per week. This enabled them to refocus efforts and the property manager was able to provide white glove service to tenants, rather than double checking permits. This technology created a positive impact on the companies served and tilted their culture to be even more customer-centric. Now more than ever we’re seeing a major focus placed on the tenant experience and providing value.
Technology will continue to be a driver of cultural change, and vice versa. The dynamics of business are changing, and you must figure out if you’re on the leading edge or the lagging side.