How to Win Converts During Today’s Amenity Wars
As Vacancy Rates Drop, Competition Heats Up
According to CBRE Reports, the commercial real estate industry’s leading authority on the market, the “overall office vacancy rate dropped by 10 basis points in Q4 2018 to 12.6%, the lowest level in 11 years.”
CBRE also found that “more than 90% of markets tracked by CBRE Research posted positive ‘absorption’ in 2018.” In some cities where Tech is booming, the impact is even stronger. Seattle and San Jose recorded the largest vacancy rate drops, bringing commercial vacancy rates in these metro areas below 10%. This consumption of available rental spaces totaled over 58.3 million square feet—which is the most vacant space absorbed since 2015.
So what? If you own or manage a commercial property, you already know about these trends. Hopefully, you’re enjoying the prosperous wave of low vacancy rates. But if you’re one of millions of commercial property owners with aging real estate assets or churning retail sites, the picture may not be as rosy.
Your competition is also heating up. Construction completions totaled 49 million square feet in 2018, the second-highest annual total since 2009 according CBRE. It reflects high demand for new, high-quality space. Older buildings with limited amenities are increasingly and harshly contrasted to new properties with latest services, nearby hip retail and the newest in-building technologies.
How do we know? Nearly 70% of the square footage delivered in 2018 was pre-leased according to the report. Also, the average rent increased by 2.7% in 2018, up slightly from 2017. But in many tech-drenched metropolitan markets—including Portland, Boston, Orlando, San Francisco, Oakland, Seattle, Denver and Austin—rent growth was up by 6.5% or higher. We believe this trend is explained by more than just regional differences.
How can Property Tech Investments Help?
What’s new is that an increasing number of visionary owners and property tech (or PropTech) leaders have seized on technology as a valuable way to set both aging and brand new properties apart from the pack.
What’s PropTech? It’s a term that describes innovations in technology that improve property management and tenant/visitor/retail experiences.
Property technology, ‘Proptech’ for short, is something of a catch-all term for a disruptive new breed of data-based startups and intelligence innovators now applying their skills with analytics and algorithms to the real estate sector. ~ Jim McClelland, JLL Real Views
Intelligently adding digital, interactive technology to your common, shared spaces increases the convenience and value of a property. From welcoming a new tenant or event attendees to showcasing nearby restaurants, transportation and venues—busy people appreciate fast, easy access to interactive information that gets them to the experiences they want. This tech includes smart displays that fit your space—from lobbies and event spaces to your outdoor areas and elevators.
Better yet, information delivered on smart displays should easy transfer information to mobile devices—without the need to download yet another custom app requiring multi-step login and registration nuisances.
How do we know? We deliver smart digital displays to over 9,000 spaces today. What they all have in common is the need to save time while affordably upgrading commercial, retail and healthcare spaces with appealing, modern and easy to maintain technology. Digital directories, elevator displays and video walls deliver functional elegance to any space. What’s more, they make your property look more attractive to an increasingly selective clientele.
Isn’t PropTech expensive?
One reason why investors are embracing PropTech is that it’s affordable, easy to prove out and delivers on both top and bottom line value. While Hollywood-style AI for your entire building might cost you a pretty penny, practical IoT-powered digital directories, displays and video walls are the new normal. They add immediate value without taking up much valuable space or budget:
5 Ways PropTech Delivers Value
- Showcases buildings as tech-savvy as a means for keeping existing and winning new tenants.
- Attracts flex office space and special events clients without the cost, risk and time of undergoing new construction.
- Save time, effort and money with simple to order, install and maintain solutions that serve your entire property.
- Lowers the cost, effort, errors and poor quality of using outdated, single-use slat directories, lobby posters and flyers to communicate news and tenant information.
- Captures live data from sensors to inform when buildings have high traffic, what visitors are searching for and what ads/offers might appeal to your guests.
Most importantly, modern digital signage and displays allow you to upgrade your building for a fraction of the cost of building repair, facility makeovers or new construction. And for those already doing well, sleep with one eye open. Lease renewals aren’t guaranteed and the next shiny new building is right around the corner…literally.