Years before the pandemic upended established workplace dynamics, leading property managers predicted the emergence of experiential office. Inspired by hospitality, it was a vision of tenant-first office management aimed at fostering meaningful relationships and rich experiences. The post-pandemic prevalence for hybrid work has quickly made that vision a reality. While some of the details have changed—like a greater emphasis on health and wellness and inclusion—today, the office has become a center for socialization and collaboration, just as expected.
JLL’s Future of Work 2022 survey illustrates just how much the concept has evolved. More than three-quarters of companies are focused on investing in quality office spaces, and 73% of companies are adopting collaborative open concepts and eschewing dedicated desks. But experiential office is more than a high-quality design. The office is becoming a place to improve employee physical and mental health, support flexible working patterns and drive social value and sustainability initiatives.
To deliver the space-as-a-service concept, property managers have had to develop new skills beyond operational and financial excellence. More and more, property managers are turning to hospitality professionals who are adept at operating at the intersection of facilities management, services, and customer experience. It’s this expertise that will help property managers curate the experiential office environment that today’s tenants demand.
Flight to quality drives leasing decisions
The demand for purposeful office space is evident by the most recent tenant leasing activity. While office leasing has been turbulent since the start of the pandemic, an effect of the widespread adoption of remote work and corporate workplace re-strategizing, new high-quality and amenitized properties have generated nearly 87 million square feet in occupancy gains, the vast majority of office leasing volume. Office product built after 2015 has a 16.5% vacancy rate, compared to the 19% vacancy rate for the broader market, once again showing a preference for newer properties.
This leasing trend has held through the third quarter. Trophy office assets with amenities are retaining value, while properties without them are suffering. Some property management teams are tightening budgets and looking for places to trim back cost expenditures to cope, but proactive office owners are embracing the hotelization of real estate by investing in property improvements and onsite services and installing client-facing managers to cultivate a rich experience.
A formal education
Over the last two decades, hospitality has evolved into a sophisticated industry. Today, most universities offer a degree in hospitality management, and the average hotelier is entering the industry armed with a specialized degree. But the benefits aren’t exclusive to hotels. Hospitality training and education are applicable to a wide range of commercial real estate assets. Along with offices, museums, hospitals, airlines, non-profits, and even funeral homes are recruiting hospitality professionals to drive better customer experiences. Many hospitality programs are adding office management and other real estate courses to the standard curriculum.
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I recently sat down with Edwin Torres, department chair of international hospitality and service innovation at The Rochester Institute of Technology’s Saunders College of Business, which just so happens to be my alma mater. The hospitality program has added courses in operational management, site selection, project management, and franchising in recent years to deliver well-rounded students that are equipped to handle opportunities in a wide selection of asset classes. For office assets, hospitality is fostering enthusiasm and creating a place where people feel compelled to go. “Those skills are still going to be important, and those are the skills that we can further advance in our program,” explains Torres.
There is tremendous demand for diversified hospitality programs, and students are recognizing the potential for career advancement with a hospitality degree. In particular, master’s degree programs in hospitality management have seen a surge in enrollment, and Torres expects these programs to continue to grow in popularity as they become more multidisciplinary. He currently has his sights set on expanding even further to include training in specialized areas like asset management, events and entertainment, data and analytics. These courses will complement the current offerings which provide future managers skills in hotel management, beverage management, and the design of customer experiences.
A new generation of property managers
As the office market evolves so will the role of property managers. Hospitality is quickly becoming a key component of the job, which will entail everything from managing asset budgets, overseeing costs and hiring and managing vendors to responding to tenant needs, planning events and managing services, like onsite food and beverage options.
While there is no formal property management degree, hospitality programs are filling that void. Torres describes hospitality management as an entrepreneurial industry where managers learn to oversee multiple businesses under one roof, all while driving a cohesive and positive experience for guests. Sound familiar? Office owners are finding increasing success tapping into this market as a resource for the next generation of property managers.
As such, future property managers will have to strike this balance between providing superior client services and maintaining the operational and financial health of the property, but in some ways, this has always been the role of quality property management—to serve as the liaison between ownership and occupants and fulfill the needs of both. By incorporating hospitality standards, property managers are simply executing a longstanding mission: to take good care of the property and its occupants.