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Office Landlords ‘Can’t Go Through The Motions,’ Must Engage Tenants In Return Push

The coronavirus pandemic has cast a cloud of uncertainty over the office sector as companies decide how, when and whether they will fully return to the office space they occupied prior to the pandemic.

As those decisions are being made, many office buildings are less than full. In 10 major metros across the country, occupancy in office buildings is averaging 31%, with LA occupancy averaging 27.2%, according to data from Kastle Systems, a maker of keyless entry systems for office buildings that uses anonymized information from those systems to track building occupancy. 

Real estate experts say that landlords looking to help make that decision easier and entice workers back to the office have to deal with high tenant expectations that go beyond what many landlords are accustomed to.

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“In prior years, the landlords just kind of — and I don’t mean this in a derogatory way — pretty much, in comparison to today, sleepwalked through being a landlord,” said Newmark Executive Managing Director John Ollen, who moderated a panel at Bisnow’s What’s Next For LA Office? event. “... You just collected the rent, you made sure the windows were clean, that there was parking."

But now, the expectations of what a landlord will do for its tenants have been “ratcheted up to an entirely different level. It requires a lot and it’s a lot of work,” Ollen said.

“Tenants are looking for ultimate flexibility,” JLL Executive Vice President James Malone said. “They want to be treated like they’re a welcome guest every day. Because their employees are demanding that.”

Employers are trying to hold onto their talent, Malone said, so they are looking to deliver what employees want. The result of these expectations spilling over to property owners is that now the landlord is responsible for the whole experience, from the moment tenants park to when they leave, Malone said. 

Watt Cos. CEO Nadine Watt said that landlords have to make adjustments to meet the desire for flexibility. 

“People are finding that they are going to work on the weekends, so owners will have to have weekend times available. You’re going to have to have more amenities,” Watt said. 

Watt said that a hospitality-like approach, including on-site events for tenants that allow them to come together, will be part of the process of that crucial return. 

Newmark's John Ollen, JLL's James Malone, Essensys' Chris James, HqO's Eric LaCoursiere, Watt Cos.' Nadine Watt and Hospitality At Work's Daisy Gauck.

The pandemic has caused landlords to really rethink the way they interact with their tenants, beyond just going into “rent collection mode,” HqO senior account director Eric LaCoursiere said.

“An outcome of the past 18 months has got to be, we can’t go through the motions on tenant engagement, and we can’t go through the motions on tenant communication,” LaCoursiere said. 

Hospitality At Work Senior Vice President Daisy Gauck said that communication, especially in the earliest days of the pandemic, was not always easy but has proven to be an important way to build trust with existing and prospective tenants. 

Gauck said her company’s decision to alert tenants to all coronavirus cases that occurred in the building was rough in the beginning, as tenants equated cases with improper cleaning techniques and criticized the landlord. But the tone of responses quickly changed.

“As we went on and people became more educated, we all did, it turned into, ‘I’m so glad you’re telling me when this is happening. Thank you for being honest,’” Gauck said.

Gauck said she found communication to be a critical element of keeping existing tenants and gaining new ones. 

“With leasing, that’s definitely an issue,” she said. “People want to see what your communication strategy is and what you’re putting in place.” 

Gauck, LaCoursiere, Malone, Ollen and Watt spoke on the Bisnow panel along with Essensys Senior Vice President of Business Development Chris James.