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Agility Might Be The Most Underrated Aspect To Commercial Real Estate Growth

Re-Leased 19 February 2019

Let’s talk a little bit about talent agility first...

What does talent agility even mean? It may seem like one of those terms that’s used by startups with no track record of success, but the term talent agility actually carries a lot of weight today. It’s something that executives and decision makers are continuing to warm up to and are understanding how to applies it to their businesses.

For commercial property executives, this is no different. Building out the right team that aligns with commercial goals can be challenging, and today with the rapid movement of the modern workforce it can be a task to shape out an organisation of world-class property professionals.

Specifically, seeking out top talent that aligns with business goals is getting increasing tougher in recent years. Some industry pundits even view it as quote-un-quote talent war, where competitors are scrapping to find the best managing agents on the market to hire them before anyone else does.

In a space that’s changing rapidly, and a space where some would argue that desperately needs disruptors, commercial real estate (CRE) executives continue to maintain a level of urgency around being organisationally nimble to nab up talent that’s going to move the needle for business success.

A global trend that we can expect to continue to see is that businesses have shifted their approach and are continuing to listen to the workforce as they compete for the pool of top talent. Not only does the top talent of today want to work in high quality indoor environments, overall job growth and career progression, and job satisfaction is determining and dictating where talent ultimately ends up. But while all of this may seem like it’s off course and not part of the usual vernacular of employers, it’s clear that it should be particularly when we’re talking about commercial property professionals.

Tenant expectations are changing (and fast)

This sentiment rings true for tenants, too, whose industry of operation may not fall part of the commercial real estate industry, however, yet they still share the same values and expectations of how a space should look and feel to those who work in the industry. Overall, there's a common theme in all modern industries: changing expectations.

The demand for quality buildings that encompass tailored and custom fit outs have made today’s landlords have to adjust and provide a product that’s dictated by the market, even if it’s a cost or a strategic direction they don't want to pursue.

Typically, and if we look at the historical playing field of commercial real estate, landlords have always been risk-averse and often unlikely to invest in updating their buildings – it’s just something that’s never really been a part of historical investor strategies. But the shift in being more open to making physical updates to buildings can be seen in the office space market segment, where things like ground floor lobbies and multi-purpose common areas have grown largely in favour with today’s tenants. They want these communal spaces thought-out and designed on their terms.

And yes with these areas having to suit modern tenants, it has become somewhat of a must-have commercial space requirement, and in a bid to keep tenants in fruitful lease agreements, buildings really do need to meet their set of criteria to draw interest. You could argue that the power is in the hands of the tenant today, which is keeping landlords on their toes and competition as rich as ever. You can even make the argument that this is healthy for the wider industry: the increase in competition leads to revised approaches to business, which opens up the argument that this is positive for increasing investor yields by spending money to make money.

So what about the term “agile commercial real estate”?

According to global commercial real estate giant CBRE’s The Agile Advantage whitepaper, “owners, occupiers and service providers are looking for new models – grounded in the concept of agility – to deliver highly effective workplaces, differentiated assets and optimized portfolios that yield more value for the organisations and the people they serve”.

It’s the shift to what commercial property thought leaders are calling a “consumer” mindset by tenants and it has spurred the growth of this idea of agile real estate, which has real life implications on portfolios, property management agencies and commercial landlords.

What is the fundamental role of agility in commercial real estate? As CBRE define it, it’s workplace environments that are dynamically nimble in their support of modern organisational and employee needs. Or in other words, they are commercial spaces that facilitate growth in today’s ever-changing, digital world, which circles back to those points on changing tenant expectations.

But to effectively execute on an agile strategy, there are key components to incorporate: environments need to be productive, businesses need to be efficient and flexible, and they need to discover ways to be experiential. These are the variables that define the hierarchy, or the top-to-bottom make up, of agile commercial real estate, according to industry thought leaders.

For occupiers, the shift in office space requirements couldn’t be any more drastic – we’ve gone from traditional workspaces that are assigned to specific people, to project-based spaces designed to facilitate members of a project, and now to activity-based design that encompasses unassigned spaces for people who wish to work in a peer-to-peer, mobile environment. Co-working and incubation juggernauts such as WeWork have revolutionised – and some would even say are the 'Uber' of their industry – the office market space, and this is something that has affected yields and caused investors to rethink their strategy.

Identifying as an agile operator is really important for commercial real estate software service providers

According to an article on mastering talent agility, a BMW board member said that there’s going to be more change in the next 10-15 years than we’ve seen in the past 100 years. What the big question this executive raises is essentially how (and if) manufacturers will learn how to become, and ultimately view themselves as, technology companies quicker than technology companies learn to become automotive companies. It’s an interesting take that does a good job of shining a light on how identities are changing, and if we look at it from a real estate perspective, this very much pertains to the commercial real estate space in a big way.

Software as a service (SaaS) companies in the commercial real estate space that see themselves as tech companies providing a digital solution for an end user can better serve their target market – that means identifying and operating with a lean mindset to deliver a solution to a commercial real estate  problem. 

So essentially, in order for software providers in the CRE space to be the best they can be, they have to boast as a tech company providing a service to commercial real estate professionals, much like Salesforce, for example, identifies as a tech company providing a service to sales teams. And for landlords, investors and real estate professionals looking to improve their operations, this is something that they should look out for when shopping for property management software. Make sure you choose the right software provider that sees themselves as a partner in business.

As industry thought leaders believe it’s best to design spaces with agility in mind today, and undoubtedly it’s often the most underrated aspect to commercial real estate growth – for investors and agencies. With this there ultimately needs to be a focus on workspaces that are designed for today but with room to be adaptable for the future. Landlords, commercial property managers, software service providers and tenants will benefit from adapting to being truly agile.

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