The firm that sold Chelsea Market to
Google for $2.4 billion has joined three large brokerages, among others,
to back software designed to meet the growing demands of a millennial
workforce that is changing how office space is leased and managed.
Office workers now interact online or through smartphones and landlords
who ignore this trend will lose clients, said Michael Phillips,
president of Jamestown LP, a real estate investment firm that mixed
off-beat food and retail at Chelsea Market to make it a major Manhattan
destination.
Landlords looking to boost the loyalty of tenants have begun rolling out
apps that allow them to connect easily with a range of in-house or
nearby amenities and services, everything from restaurants and gym
classes to office climate controls.
This so-called tenant engagement software is still in its infancy but
stands out among the newest features of a U.S. office market that has
been disrupted by the move to flexible workspaces where many landlords
have lost direct contact with the client.
While U.S. leasing activity is robust and asking rents have declined a
touch from highs at or near records, concerns the business cycle is
peaking have sent landlords in search of fresh ways to retain tenants.
Jamestown recently invested in HqO, a Boston start-up that also is
backed by venture capital firm MetaProp, whose limited partners include
brokerages CBRE, JLL and Cushman & Wakefield.
Terms of the Jamestown and MetaProp investments, which have not been previously reported, were not disclosed.
Jamestown at first tested the software at the Innovation and Design
Building it owns in Boston’s Seaport District, where the speed of its
adoption was startling, Phillips told Reuters.
“What that tells me is the workforce is open to it, craves it, understands it and is engaging with it rapidly,” he said.
In three months, 40 percent of tenants opened HqO accounts and within six months 60 percent had done so, he said.
A software platform is needed in commercial real estate but will not be
game-changing until the property and technology owners are the same,
said Daniel Doyon, managing principal at consultancy Workplace
Hospitality Management in San Francisco.
“The real value creation is going to be whoever figures out how to
seamlessly blend those two. You can argue WeWork is the one who’s done
that,” Doyon said, referring to the New York-based provider of shared
workspaces.
Australia’s Equiem, a pioneer in the space with more than 130 buildings
using its software in Ireland, Britain, the United States and its home
market, also reports a growing client base amid increasing competition
from rivals.
Hines, a large U.S. developer, announced in December it was partnering
with Paris-based Workwell to roll out tenant experience software in its
buildings in Houston, New York, Chicago, Atlanta and elsewhere this
year.
Others offering similar software are London-based District Technologies and Lane Technologies Inc of Toronto.
Equiem recently installed its software in the Nomad Tower in Manhattan, 5
Houston Center in that city’s downtown and the Arborcrest campus in
northern Philadelphia.
Melbourne-based Equiem last year hired a U.S. manager as it expands into
Canada and Singapore this year. Since its launch in 2011, Equiem has
posted a compound annual growth rate of 172 percent, said Chief
Executive Gabrielle McMillan.
Equiem’s software costs around 10 cents per square foot, or about
$100,000 annually for a 1 million square foot office tower, which is far
less than property management budgets, she said.
The software can create a brand for property owners, drive loyalty among
tenants and ultimately lead them to renew their office leases, said
McMillan, who moved to New York from Australia last year to supervise
the firm’s U.S. expansion.
David Levy, principal of Adams & Co Real Estate LLC, has rolled out
Equiem in 20 of his buildings located from 18th to 41st Street, perhaps
the hottest swath in Manhattan catering to tech-centric young urban
professionals who demand amenities.
Adams has tracked 3,700 users, exercise classes at his buildings are
full and the tenant response has been positive, Levy said. But like
public relations, he said it is hard to know how well the platform is
working.
Brandon Kang, a 33-year-old fashion industry product manager who works
at an Adams building on 40th Street, is emblematic of the clients whom
landlords are hoping to cultivate with these systems.
Kang said he has noticed the Adams name and is aware the firm manages other buildings in the Garment District.
“I know their logo because they keep showing it on the elevator and on the website,” Kang said.
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