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LESSONS FROM RETAIL

Retail centres have shown innovation in their offering to end users; offices should apply these same principles, argues John Preece

The commercial office sector has lacked any significant innovation beyond automation of manual processes, and it still relies on long-term lease commitments to underpin asset values, despite occupiers’ business cycles being shorter than ever before.

However, the pandemic has finally unshackled ‘work’ from ‘place’ and many landlords, fearing a collapse in asset values due to weakened demand and increased vacancies, are calling for everyone to ‘return to the office’. But there has been a fundamental shift in how knowledge workers operate, and the majority are never going back to the ways of the past.

Finding inspiration

Those involved in the development, ownership and management of commercial office assets should look to the hotel and retail sectors for inspiration: elevating the ‘customer experience’ and basing all decisions regarding service, amenities and flexibility on the creation of a great experience.

The end user of commercial assets must be the most significant consideration. This requires elevating hospitalityled services above purely functional factors such as quality air conditioning and lifts, sustainability and great end-of-trip facilities.

Creating the ‘customer experience’ ecosystem

Retail centre owners worked out decades ago that customer experience is the key to success, and creating an environment that attracts people to do more than shopping is critical. These ecosystems include leisure, dining, fitness, wellness, cinemas, government services, mall quality and ambience, amongst others.

By creating a genuine customer experience, these property owners can attract great retail operators who will pay a premium to have their own brand represented in a quality retail centre. Retail centre owners and retail operators have a mutually beneficial, co-dependent, relationship – rarely captured in a traditional landlord/tenant lease. Turnover rents and revenue-sharing provisions allow the owner to benefit from the operator’s strong performance and share a proportion of the downside risk when times are tough. The retail ecosystem creates a great customer experience, from the moment a customer drives into the car park or steps into the building. For retail operators, stores are spaces for a brand immersion

JOHN experience: a separate PREECE is Chief Property and bespoke offering Officer at Hub within the centre

Australia owner’s creation. Offering a new proposition

Contrasting this with commercial office assets, property owners are largely ‘hands off’, providing a financial incentive to the tenant through the commercial leasing transaction, and taking a step back to rent collection for the term of the lease. This proposition no longer meets the needs of most organisations or their employees.

The future ‘office’ is an HQ venue. A brand immersion and experiential venue for employees of an organisation to meet and collaborate with colleagues, bring clients, and entice recruits. Like the stores in a successful retail centre, these HQ venues will succeed in buildings where they can leverage a great customer experience, amenity, service and flexibility curated by the property owner.

But, how many office landlords have realigned their thinking?

Commercial office landlords can learn a lot from the hotel sector regarding service standards. They can learn even more from the overall approach of great retail centres in the creation of an ecosystem of spaces and amenities supported by great service standards that genuinely add to the success of individual organisations that create their HQ venue within those assets.

Further, the landlord / tenant relationship needs to recognise that landlords have a more significant influence on the success of the HQ venue than before, which necessitates a different commercial relationship. The long-term ‘set and forget’ lease of the past is just that – a thing of the past.