As we enter a new year, it is normal to look back at the year, as well as years past, and think about how our industry and markets have changed and speculate on how things may change in the future. Many of these changes are obvious and there for all to see, while others are more subtle in nature and require putting together several pieces of the puzzle to establish a likely outcome. If there is one thing that I have learned throughout my career, it’s that no one really “knows” what’s going to happen next, although the ability to “guess correctly” is a gift that some are better at than others. With this caveat, I’ll make the mistake of putting a few things down in writing, which will inevitably be used against me in the future should any of my guesses be proven incorrect. But hey, Nostradamus didn’t become famous by shying away from making predictions. My personal focus is on Office Tenant Representation and I sit in the Charlotte, NC market, so know that several of my comments may have a geographic or business line slant, although many of the themes will apply across borders.
The Millennial trend isn’t going anywhere. But why would it?
I generally laugh when the discussion of Millennials comes up. I have been an outspoken critic of those who would ignore the greatness of Generation X, but somewhere along the way the conversation went from the Baby Boomers straight to the Millennials. What about my generation? Do we have nothing left to offer society? That’s a conversation for another day,I guess. With regard to the Millennial generation, I regularly hear about “all the things they want” in a workplace and how the way they want to work is so different than previous generations. I’m not sure I buy it. Every time I see the list of things that Millennials supposedly want, I am hard-pressed to find anything on the list that I don’t want as well. Flexible work spaces, so I don’t have to stare at the same wall every day? Check. Great technology allowing me to be productive both within and outside of the office? Check. Diverse amenities including fitness, conferencing, as well as places to connect with co-workers and peers alike during the workday and after hours? Check. I’m not certain that these are Millennial wants, as opposed to current human wants.
One might ask: if that’s the case, then why is so much change occurring now? Causing change in our society generally requires two primary components. First, the change that you are trying to impart has to be of value, either to the employee, employer, or society in general. If the change you are trying to cause is actually going to make things worse, particularly for the entity forced to pay for the change, the likelihood of long-term adoption is low. Second, and more importantly for our purposes, it needs to be supported by the masses. In this case, the “masses” are the Millennial employees. Combine one of the largest generational employment bases with low unemployment rates and you create the critical component in imparting any meaningful change: leverage. We happen to be living at a time where the confluence of certain workplace desires are supported by the technology that enables them, and the Millennial generation is becoming ever more vocal about what they want from an employer and a workplace. Good for them and everyone else, as there appears to be many quality-of-life-benefits to the changes that are being requested/demanded in the workplace today.
How will this trend affect employers?
Until the current economic environment cools, the war for talent is likely to heat up and become fiercer. In almost every industry segment, the difference in the success or failure of a company lies with its employee base and the ability to recruit and retain talent will be on the minds of many CEOs in 2018. Luckily, while not a silver bullet, these same CEOs have a couple of things working in their favor. First, as I stated earlier, many of the changes that are being requested by the younger generation will actually appeal to all employees. Few will complain about greater flexibility in their days and better amenities to support their happiness and productivity, so CEOs won’t need to appear like they are “playing favorites” in what initiatives they support. Second, many of the things Millennials find most appealing, actually result in savings to the company. The ability to have non-dedicated desks including co-working environments, more dense workplaces, smaller overall workplace footprints and enhanced productivity in the spaces they do occupy all lead to enhancing the company’s bottom line. For these CEOs, and the teams that support them, one of the most difficult decisions they face is knowing when a trend is sustainable over the long term and when a new concept is likely to flame out as quickly as it caught on. The money that is wasted retrofitting and converting spaces from one trend to the next and back again can be staggering if handled poorly. For our clients, we rarely suggest going “all-in” on the latest trend, unless being on the cutting edge is already part of their DNA. Office tenants can easily select several lower-cost areas to make their space more Millennial-friendly and achieve meaningful gains, without having to break the bank.
What can building owners do to embrace this trend?
If I had two words that I wish I could get every building owner to memorize and repeat to themselves over and over during the tenant recruiting process, they would be: “Be flexible”. We are at a point in time where the diversity within office users is at the greatest it’s ever been. What one office tenant “absolutely must have,” another prospective tenant won’t even consider. Firms are looking for ways to stand out from their competitors. Again, the war for talent is to blame. While prospective tenants don’t want a cookie-cutter approach to their real estate decision-making, what they can’t afford is a building owner who forces them into the owner’s box in order to get a deal done. I am constantly amazed at the ownership groups that say things like “we can’t do that,” or “that’s not something we’ll consider,” even before hearing what my clients are willing to provide to offset their request. Few tenant rep brokers would tell you that getting deals done today is easier than when they started in the business. The process is getting ever more complicated and the time and approvals required to get transactions closed can be painful. In the end, the building owners who will likely have the most success are those who are willing to sit down and listen to their prospective tenants. Perhaps adding a new social gathering spot in the building where employees can unwind is an item that tips the scales. Some tenants may desperately want to embrace new trends, but can’t afford to front the capital to achieve all that they want. Other prospective tenants may need greater flexibility in growth or contraction strategies. All of these scenarios represent incredible opportunities for a building owner to solve a potential problem, and they are almost always solvable. It just takes time and creativity.
As we begin a new year, I suggest that office tenants and building owners stop referring to these suggested changes as “Millennial trends” and instead refer to them as what they are: workplace improvements. It will avoid pitting one generation against another (we all know Gen-X would win anyway). On both the corporate real estate side, as well as building ownership, more diversity is needed in how decisions are being approached. I have toured many clients over my 20-year career. Do you want to guess how often a 20-something is part of the decision-making contingent or even actively touring building options? Likewise, it is quite rare to see a 25-year-old on the acquisitions team for large institutional investors, unless they are working as an analyst to run the numbers. Why not get insight directly from the target employee base you are trying to attract? What better way to get real-time feedback about a particular asset or submarket? If you’re an owner and you have a chance to make a deal, listen, be flexible and get creative. While there will always be tenant rep brokers who want to win every single business point for their clients, the more savvy brokers realize that when you try to win everything, you generally truly win nothing. Ask them for priorities that need to be solved and be prepared to share your priorities. If they can’t tell you the three items that will make or break the deal from their client’s side, then they are either lying to you or they need some real help maturing in the industry.