How to Attract and Keep Commercial Tenants

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If you invest in commercial real estate, 2021 could be a challenging year. The COVID-19 pandemic pushed much of the U.S. workforce out of their offices and into their homes. And surveys and studies suggest that demand for office space post-COVID may change permanently. 

However, it’s not all gloom and doom — one landlord’s nightmare is another’s investment opportunity. Tenant needs have changed since the pandemic began, and meeting those needs can propel you past your competition and into new, profitable leases.

Here’s everything you need to know about how to attract and keep tenants once the pandemic winds down.

What Do Commercial Tenants Want in 2021?

The post-pandemic work world will present some interesting contradictions, according to futurists at WSP

On one hand, tenants who allow their employees to work from home part- or full-time are discovering that they only need to accommodate 60% or 75% of their employees at any given time, and that they don’t require permanent desks, cubes or offices for every single person. But on the other hand, new social distancing habits mean we’re not necessarily comfortable in close proximity and may require more space per employee. 

Landlords need to understand that just as they are competing for commercial office tenants, their tenants may be competing for employees to occupy those offices. And you can help them do that by offering flexible features to help them maximize the use they get from their workspace while also maximizing the return on your investment.

David Gooderham, global account director with WSP in London, explains that businesses will have to provide safe working environments, create a “feel-good” vibe and “ultimately raise productivity and creativity.” The office needs to enhance the working experience, or people will see little need to pay for such space or commute to such space. 

Productivity enhancements include “homier” colors and furnishings, live plants, less “corporate” artwork, and collaborative, airy workspaces. It’s no longer enough to require employees to come to the office. Today, tenants need their employees to want to come into the office. 

Safety First

Employees returning to the office will be very focused on  the safety of their environment. Even as the coronavirus pandemic retreats, attitudes have likely been altered for the foreseeable future. 

Tenants will want to offer their workers top advances in hygiene and safety precautions. Being able to promise a “virus-proof” or “pandemic-proof” workplace can help businesses compete for the best employees and motivate them to come to work in person. A report by ARUP concluded that “post-pandemic, touch-free technology in offices will become increasingly important and could potentially be adopted in elevators, security access, etc.”

Workplace amenities post-COVID will feature technology that limits physical contact in common areas — for instance, keyless entry and touch-free soap and paper towel dispensers, faucets, and doors. 

Desired upgrades include easy-to-clean surfaces and antimicrobial materials. And consider upgrading your heating, ventilating and air conditioning (HVAC) systems to bring in more fresh air and provide more ventilation to help prevent the spread of disease. You can even add an app to display indoor air quality levels at building entrances.

Rethink Your Leases

Owners of older buildings that can’t easily be retrofitted are at a disadvantage as businesses move out of dated offices and into new, configurable spaces. If you can’t convert an older building into a more modern workspace, expect to earn less rental income.

With many countries plunged into recession after months of lockdown, demand for office space post-COVID has fallen, and tenants are re-evaluating their future investment in facilities. Companies may also demand shorter lease terms as they adapt to the requirements of future customers and employees. 

Many experts predict that commercial tenants will need 30% less office space post-COVID. If your tenants fit this profile and you can’t easily or affordably upgrade your building, consider modifying your rent agreements to retain your existing leases.

Top Amenities

Amenities were important for office buildings long before COVID. In fact, a 2019 Cushman & Wakefield study concluded that buildings with the most desired amenities could get about 20% higher rents than their neighboring, less-upgraded properties.

Although outdoor amenities were popular in many workplaces even before the pandemic, expect their popularity to surge even higher post-pandemic. Outdoor spaces offer fresh air, easy social distancing, and minimal contact with shared surfaces. 

Consider (as an example) outdoor courtyards meeting and dining spaces, sport courts and paths for running or walking. In milder climates, glass sliding doors invite light and air into the workplace all day, allowing you to alternate between natural and mechanical ventilation. Movable walls easily convert indoor space into outdoor space for gatherings and activities.

As workers embraced delivery of a wide range of goods and services, offices stepped up concierge-like offerings. Yes, food delivery is common at lunch time, but other office perks can allow employees to have their car washed, their laundry picked up and delivered, their groceries or meal kits dropped off, and their electric cars charged. Other self-care offerings include video-conferenced meditation or fitness classes, social hours and professional development.

Reimagining the Box

One casualty of the flight from downtown offices to home offices is the older Class B or Class C office building. Their outdated and inefficient systems, unwieldy floor plans and insufficient parking make them less-desirable for commercial tenants. 

However, many of these older structures are superbly located near popular attractions and public transportation. Cities are seeing the potential of converting surplus office capacity to meet housing shortages, increase tax revenue and revitalize downtowns. 

The City of Baltimore, for example, has used tax credits in recent years to incentivize office-to-apartment conversions in portions of downtown with excess underperforming office buildings and insufficient residential units. Successfully converted buildings went from underperforming their competition by 10% to outperforming it by 8%.

Don’t want to be a residential landlord? You could convert your building, fill it with tenants, and sell or exchange it for a nice modern commercial building with a respectable cap rate. 

Headshot of blog author Ben Mizes

Author Bio

Ben Mizes is the Co-Founder and CEO at Clever Real Estate, the nation’s leading real estate education platform for home buyers, sellers, and investors.

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