How the Digital Age is Transforming Office Leasing


How the Digital Age is Transforming Office Leasing

If your CRE portfolio includes office space, then you probably already know that commercial real estate leasing has dramatically changed in the last few years. As more people converted rooms at home into workspaces, the perceived value of office space in a building has changed. Corporate real estate teams are now trying to figure out the best use for office space, and they’re starting to fully embrace CRE technology to do so. 

But the work from home movement isn’t the only change altering the office leasing environment. Markets have become increasingly more competitive as corporate real estate teams vye for the best properties that have the greatest potential to attract tenants and maintain their value even as demand cools off. It’s another realization that has accelerated technology adoption in CRE.

Of all the CRE asset classes, the office sector is expected to have the slowest recovery in the coming year in markets across the nation. Vacancy rates aren’t expected to improve much and could actually rise in some markets. That’s not to say that there aren’t great investments to be made. It just means there are fewer obvious opportunities, and the margins are slimmer. 

The office leasing environment is nothing like it was before, and that means investors and portfolio managers must leverage technology themselves to make more precise estimations in order to maintain cash flow and value. In the quickly changing workplaces of the digital age, retooling your office space leasing strategy and improving your ROI with CRE market data software is now considered an absolute must. 

How Has the Digital Age Changed the Office Leasing Landscape? 

The latest office leasing statistics in the U.S. from the National Association of Realtors (NAR) was less than encouraging for corporate occupiers and CRE teams. Early figures from Q4 2021 show that newly signed office leases were down 36% compared to the previous quarter and down 11% year-over-year. 

There are several key factors affecting office leasing markets:

  • Employees are still working from home, and for many it’s a permanent change.
  • Demand for traditional workspaces is on the decline. 
  • Migration trends show people are away from large metros and business centers to smaller cities. 
  • Employers are more concerned with balancing productivity, safety, and flexibility. 
  • Greater concern over dated technology infrastructures that have difficulty incorporating emerging technologies.
  • Prioritization of environmental, social and governance (ESG) issues is at an all-time high.

In short, the office leasing market has gotten more complex as competition has become more differentiated. The factors above have made calculating risk, potential gains, and leasing terms more difficult. 

Adding to the difficulty is the fact that office leasing markets are in flux. While other asset classes appear to be on clear trajectories, office leasing markets aren’t so clear-cut. For example, primary office markets are still lagging behind in occupancy and rent growth, but secondary and tertiary markets in certain regions are gaining momentum. However, it’s uncertain whether this trend will continue as the world moves past the pandemic. 

Industries within a market also appear to have more of an impact than in previous years. Boston is the perfect example. As noted in our list of the top commercial real estate markets in 2022, Boston’s life science industry has helped it outperform other primary markets. 

Simply put, a lot more is going into the market value of office spaces and a property’s ability to attract tenants. With each factor that’s added, making accurate ROI decisions becomes more complicated for corporate real estate teams that are still using manual processes. Many have found that without a technology solution there’s no way to weigh all the factors that must be considered. According to a recent Deloitte survey, simply learning how to retrofit and repurpose office spaces for maximum value is a difficulty, and only 25% of respondents have the technology in place for such asset management capabilities. 

How Corporate Real Estate Teams Can Navigate the Markets Successfully 

Despite the challenges, commercial real estate experts and analysts are largely optimistic about the 2022 office leasing outlook. Corporate real estate teams have a better chance of ensuring better returns than the previous year by digitizing office leasing processes and focusing data analysis in three ways.

Use Office Leasing Market Data to Drive Decisions 

Nothing is going to help corporate real estate teams navigate office leasing trends in the new digital age like analyzing market data. It’s the backbone of any sound office leasing strategy, and without it estimating market value is a shot in the dark. 

CRE software makes the process manageable even as datasets grow and the market evolves. Unbiased office real estate leasing statistics will tell you not only if leases are priced above or below market value, but also where there are cost savings and potential losses. 

Monitor CRE Portfolio Performance in One Place 

Measuring the performance of a portfolio is just as important as analyzing the markets. That requires data points coming from multiple sources, which means CRE teams need a way to bring that information together to get a complete picture of portfolio performance. 

Portfolio data can give you a better understanding of how the portfolio is performing in general and trends that may be forming when you’re able to analyze all the information in one place. A software platform that combines transactional data, leasing information, dates, and key performance metrics provides a top-level view that aids portfolio-wide planning. With each passing day, the data can be tracked to reveal how the portfolio is performing over time or after each new transaction.

Transactional management is also easier when the data is consolidated and can be visualized altogether. There’s less concern about missing lease dates, failing to meet obligations, and meeting initiatives when you can analyze the portfolio without bouncing between business systems.

Utilize Proper CRE Benchmarking Data

As noted above, office leasing is going both ways depending on the local market. Some metros are enjoying nearly 5% office rent growth and declining vacancy rates while others are remaining flat. Utilizing proper CRE benchmarking will give you an accurate picture of not only the market but how your specific property will perform within the market. It’s a competitive analysis tool that can make a huge difference in terms of lowering vacancy rates and signing more leases.  

CRE benchmarking is most beneficial when you can compare portfolio performance nationally, regionally, and locally. However, for accurate benchmarking, you’ll need comparisons to be standardized. Tools like BenchCore use a validation process to ensure accurate comparisons regardless of whether you’re benchmarking globally, for a particular asset class, against a region or a certain competitor. RefineRE created the BenchCore solution so that corporate real estate teams have a simple way of benchmarking performance accurately across a number of variables and markets. 

Digital leasing tools are quickly being adopted by corporate real estate teams across the country. After years of watching proptech take hold in the residential sector, the benefits of leveraging technology and data for CRE portfolios are undeniable. It’s clear that manual processes simply won’t cut it as office leasing evolves. 

CRE software is essential on the managerial level. There’s simply no way to efficiently organize and track all of the key data points manually. The ability to get updated data and auto-generated reports in real-time is another huge gamechanger for portfolio management, particularly when the market is changing.

CRE software is also critical from a competitive standpoint. Predictive analytics is one of the biggest advantages data analysis tools have given the commercial real estate industry. It’s far easier to make projections and be among the first to identify commercial real estate trends with advanced algorithms that track millions of data points over time.

With the right CRE tech solutions in place, resource management is improved as well. Imagine being able to spot a trend in space utilization before making costly investments in retrofitting and renovating an office building to better suit the needs of today’s tenants. Having that data helps you make the most of your resources and time by reducing the need for further modifications and getting you ahead of buildings that are slow to notice the trend. 

Simply put, corporate real estate teams don’t have the manpower needed to analyze all of the valuable data that’s being collected. And now that technology solutions are being widely adopted, CRE teams run the risk of being behind the curve and the competition.  

For many corporate real estate teams, the need for technology solutions is clear. Now, it’s a matter of putting the right solutions in place. RefineRE’s CRE software solutions are purpose-built for the corporate real estate industry. Right out of the box, corporate real estate teams can begin gaining insights that they never had before and need to navigate the changing office lease environment. 

Some software offers only the basics, whereas RefineRE goes well beyond top-level office real estate leasing statistics with deeper insights and more ways to analyze the information. 

Start your analytics with the Portfolio Manager to see the key performance metrics for your entire CRE portfolio in one place as well as trends in the data that can help inform investment decisions. 

Market Intelligence is what every CRE team needs to determine fair market value for a location and identify commercial real estate leasing trends so that risk assessment is more accurate and cost savings are more obvious. You’ll get detailed office leasing market data and comparisons that allow you to justify decisions with data. 

BenchCore provides competitor insights so your team can make strategic decisions that boost performance and improve competitiveness. 

As many portfolio managers know, office space may need to be repurposed for the new digital age of work. FLEX is an advanced analytics tool that makes it possible to not only tell which changes will pay off, and also identifies office leasing trends that provide direction for future improvements. 

Workplace Analytics gives you an even closer look at space utilization to determine the highest purpose, where cost savings exist, and how vacancy affects the bottom line so that every square foot is fully optimized. 

Environmental Social Governance is a top priority for your portfolio, which is why RefineRE has added the ESG software module to analyze the emission and carbon footprint of a property — guiding real estate teams on the path to net-zero.

Adding data analytics to your daily schedule is completely possible with the Data Foundations dashboard that gives you information at a glance, and auto-generated reports that make data visualization clear for everyone on your team. Each module is customizable so that it fits your personal needs, with your own Data Foundations analyst at your beck and call.

Despite how robust the data sets are, RefineRE software is intuitive and remarkably easy to use, which is critical in ever-changing CRE markets. See how easy it is for yourself – request a complimentary software demo to learn how RefineRE can be used to improve your office leasing strategy. 

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