On this episode, we chat with Ciminelli Real Estate Corporation’s Executive Vice President, Kyle Ciminelli, about changing tenant-landlord expectations and how the pandemic has impacted back to office life.
Thank you for joining us, Kyle. We appreciate you taking some time out of your week to share some of your professional insights on office life and how that tenant/landlord relationship has evolved over the last few years. I want to start by talking about at-home work. There has been some discussion around repercussions from at-home work. What are your thoughts on a lack of person-to-person communication, is it really impacting office growth?
There is no black and white answer to that question. It really depends on the industry, people, age of the company, and how the company is looking to grow. I’d say the more this pandemic has gone on, the more it’s leaning toward “yes” in answering that question, but there are still a lot of companies that have the right setup to continue work-from-home inevitably.
Are you seeing any long-term leadership issues due to lack of mentor relationships?
Yeah, I would say that’s the primary fault, or the primary negative outcome, of working from home. How does a young person in their career grow within an industry, create a mentorship, and how does a mentorship really take on and educate the younger workforce when the interactions are primarily virtual? It’s really a tough task that we have all tried to navigate as this pandemic has become longer and longer.
Throughout the pandemic, we shifted our homes to look like an office. Now it seems our offices are shifting to look a little bit more like our homes. How do landlords find the “home, but not home” balance when creating an office environment?
So, there are two ways to answer this question. How do landlords create the environment within their buildings that offer a lot of the amenities and experiences that would bring their employees away from home and into an office building? That question can be answered by not just creating the amenities, but creating a program behind the amenities. A landlord really can’t just drop a gym in the corner of a building anymore and say, “We are fully amenitized.” There needs to be a health and wellness program behind that gym. There used to be a day when collaboration within a lobby was frowned upon. Now, landlords are looked upon to create that “homey” environment within a lobby to help employees feel like they are at home when they come to work. For example, they have that couch to sit on when they bring a laptop down to the lobby. So, to answer that question, we created so much time over the pandemic, and you’ve heard me say this before, in trying to make our homes look and feel more like our offices, and that now we are coming out of this, it’s the reverse. What can landlords do both within the common areas of their buildings, but also what can employers do within their space to make the office space in the buildings more like a home?
On the other side of that, as companies are trying to lure their tenants out of their homes and motivate them to come back to the space, there’s really a lot of different ways these employers should be looking at doing that. There was a huge trend going on pre-pandemic where efficiency was key. You were trying to stack people on top of each other, people had no problem working within 15 inches of each other, and bench seating was becoming very popular. Overall efficiency was the name of the game, especially within the tech industry, and that evolved within the banking and other industries as well. Now, coming out of the pandemic, people are more used to their personal privacy. You really have to walk a fine line between still having those efficiencies and continuing to utilize your space in a way that you’re maximizing the amount of people you can get within it, but still also creating that privacy that employees need. Employers have been tasked with going out there and looking at the most new age office furniture that will provide that level of privacy, but it’s also important to be economic and fit as many employees as you can in your space. So that line, and that balance, is really what the focus needs to be coming out of this whole mess that we’ve been in the last couple of years.
Newmark Ciminelli’s bread and butter is specializing in tenant representation. How do you see these back-to-office trends altering what tenants require and expect of landlords? In addition to that, what are tenants looking for in this current environment?
It’s really interesting as we have started to come out of this and you see how the real estate market has improved and where. You’ve already seen some of those trends evolve, especially in some of the major metropolitan areas like New York and San Francisco. You can see that the deals, and especially the larger deals, that are getting done are at the top-quality buildings. They are brand new construction or something that’s been newly renovated or re-amenitized. Tenants are not afraid to pay up in today’s environment because they want the best space to not only motivate their employees to come into the office, but also recruitment and retention. These have become even more of a motivator within office space, especially with the tight employment markets and so forth. It’s really interesting to see these patterns within our tenant rep world. Brokers used to have to go in and try and sell why a building is getting the highest rents, whereas today it’s much easier to communicate those high rents because the companies out there looking for space understand that they need to compete, they need to recruit, they need to retain. You look at New York City, and you look at deals done by Facebook and Google, and these are the deals done at the top of the market, over $120 per square foot. That is a common trend you’re seeing across the country, there’s a flight to quality. At the end of the day, the quality of the office space and the building environment are what are ultimately going to lead to the success of these companies as they try and bring these employees back, recruit, and retain new employees as they grow their companies coming out of this pandemic.
Here at Newmark Ciminelli, with our Newmark global platform, our consistent collaboration with other cities, and our main hub in New York City, we have really been following the trends, clearly in our own submarket, but also across the nation of the country. It’s positioned us to help educate our local clients on what other companies are doing in other cities and so forth. So what does that mean? How are companies utilizing their office space today as they move forward? What’s the square foot per person that the big tech companies are looking at in New York City? Around space design, certain protections come with making sure that tenants are protected in result of future pandemics. A lot of those things reared their heads over the last two years when a lot of tenants realized they’re not using their space and still having to pay rent. How do they protect against that in the future? Because of this platform that we now have at Ciminelli with Newmark, it’s really helped us to get out in front of the issues that are coming out of the last two years, and properly educate our clients locally on the national trends. In addition to our tenant work, in Buffalo, Newmark Ciminelli has a large landlord portfolio. I know one of the things that our landlord clients have really benefitted from over the past few months, is our understanding of how developments are progressing across the country with some of the larger landlords in both New York City and elsewhere. How they are re-amenitizing and re-energizing their buildings to attract the best companies, attract the best talent, attract the highest rates, and so forth. We are at the forefront of re-energizing portfolios and re-energizing buildings due to our connectivity with some of the larger landlords, and real estate investment trusts, that Newmark and I have worked with over the last few years.
Thanks for listening, and stay tuned for more Ciminelli company news, real estate industry insights, and announcements.