Last Updated on August 3, 2023 by Morgan Beard
When the COVID-19 pandemic hit in 2020, we all looked forward to a return to normal. But now it’s years later, and it’s become apparent that some things will never go back to how they were. Remote work is shaping retail strategy In this blog, will dive into what this means for office occupiers and retail tenants.
What used to be the domain of traveling salespeople and international offices is now an option for millions of workers. As much as they may not like it, employers have had to adapt. A significant portion of the workforce has resisted return-to-the-office efforts. In early 2023, it was reported that 30% of all work was done from home. That’s down significantly from an early-pandemic peak, but it’s still six times the rate of remote work in 2019.
This shift in work culture has shaken up the way business works, and perhaps no sector has been more significantly impacted than commercial real estate.
You’ve probably heard the stories about shrinking demand for downtown office buildings and other storefronts. You’ve undoubtedly heard that $1.5 trillion in real estate mortgages will be due over the next couple of years, along with the concern over the value of those properties.
Some analysts have gone so far as to say we’re entering an office real estate crisis. Others contend that while there are definitely problems in the commercial real estate market, remote workers are not at fault. They assert that what we’re seeing is a natural market correction accelerated by the effects of the pandemic.
A closer examination of return-to-office policies reveals that companies are not rigorously enforcing them. Even the ones that made the loudest demands for workers to return backed off once they received just a little pushback. And if you think about it, if the problems could be solved by filling up office space to justify its cost, businesses would make it happen. It would be the easiest fix a physical office to a real estate crisis.
What some market observers think we’re seeing is the result of overspending on office space. In strong economic times, investing in lavish offices with roomy accommodations made sense. It’s simple to say the pandemic changed things, and remote workers are leaving those offices empty in favor of a virtual environment. But any long-term analysis of the economy and real estate market will show peaks and valleys.
If the commercial real estate market is going through a course correction, then now’s the time to forge a sensible strategy. It’s time for a new retail tenant strategy that considers remote work and emerging technologies as a foundation for the future.
A robust strategy based on tenant engagement and analyzing your lease portfolio data requires taking a hard look at the state of the market. Remote work is shaping retail strategy with the addition of hybrid office & retail spaces as well as new technologies. All of which may have permanently changed things. It requires adopting the right real estate strategy.
Remote Works is Shaping Retail Strategy
With more and more folks living and working from home, it has created an opportunity for retailers and small business owners to create spaces that remote workers can feel a part of a community, and can have human-centric experiences with others. The demographic shifts away from cities and into suburban communities is pushing retailers to evolve their real estate strategy. Hybrid work and remote work is shaping retail strategy as commercial retail tenants aim to reach their consumer in the communities they are frequenting.
Shift in Location Preferences
As remote work becomes more prevalent, retailers may notice a change in the location preferences of their customers. With people spending more time at home, there could be increased demand for local neighborhood retail spaces rather than centralized city centers or office complexes. This shift might be driven by several factors:
- Convenience: Customers working remotely may prefer to shop close to their homes to minimize commuting time and effort. Local retail stores could see increased foot traffic from nearby residents.
- Community Engagement: Remote workers may place a higher value on local communities and seek to support local businesses. This could lead to a rise in demand for independent and small-scale retail establishments.
- Work-Life Integration: Working from home blurs the lines between work and personal life. As a result, people may integrate shopping into their daily routines, preferring to visit nearby stores during breaks or after work hours.
- Reduced Office Footfall: With more employees working from home, retailers in office complexes might experience decreased foot traffic. This could lead some retailers to consider relocating to areas with higher potential customer flow.
Flexible Store Designs & Collaboration:
To cater to the changing needs of remote workers, retailers might adopt more flexible store designs. Here are some ways this could manifest:
- Co-Working Spaces: Retailers might allocate a portion of their stores as co-working spaces to attract digital nomads or remote workers looking for places to work outside of their homes. These spaces could offer amenities like free Wi-Fi, charging stations, and comfortable seating.
- Events and Workshops: Retailers might organize events and workshops focused creating a community hub that attracts shoppers seeking social interaction and networking.
- Multi-Purpose Layouts: Retail spaces may be designed with modular or adaptable layouts to accommodate different types of activities, from shopping to co-working or hosting events.
- Partnerships: Retailers could collaborate with co-working spaces or other businesses to create hybrid retail and workspaces, providing cross-promotional opportunities and a diversified customer base.
Adapting to New Buying Patterns:
Remote work has likely influenced consumer behavior and, in turn, changed peak shopping hours and days. Retailers may adapt their operations and marketing strategies accordingly:
- Online Shopping Peaks: With remote workers spending more time online, retailers might notice increased online shopping during typical work hours. Consequently, marketing efforts and promotions could be timed to align with these peak periods.
- Emphasis on Delivery and Fulfillment: Retailers may need to prioritize and optimize their delivery services to cater to customers who prefer shopping from home. This could include same-day or next-day delivery options and hassle-free return processes.
- Flexible Store Hours: Retailers might adjust their store hours to accommodate shifts in customer behavior. For example, they could extend evening hours to cater to customers who shop after their remote workday.
Enhanced Delivery Services:
The rise of remote work has accelerated the demand for convenient and timely delivery options. Remote work is shaping retail strategies and they impacting consumer shopping behavior. Retailers may take several steps to enhance their delivery services:
- Last-Mile Delivery Solutions: Retailers may invest in last-mile delivery solutions to optimize delivery routes and reduce delivery times.
- Parcel Lockers: Some retailers might install parcel lockers at convenient locations to allow customers to pick up their orders at their own pace.
- Subscription Services: To cater to repeat customers working remotely, retailers could offer subscription-based services with regular deliveries of essential items.
- Contactless Delivery Options: Retailers might implement contactless delivery methods to address health and safety concerns, which became more relevant during the pandemic and remote work era.
Investment in Technology:
To stay competitive and adapt to changing consumer preferences, retailers should invest in technology. Some key areas of investment could include:
- Lease Management Software: Retailers can use lease management software to better understand real estate data and space usage. This helps them make informed decisions about store locations and lease agreements.
- Online to In-Person Omnichannel Journey: Implementing technology that bridges the gap between online and in-person shopping experiences is crucial. This could involve creating seamless customer journeys that integrate both digital communication and physical touchpoints with personalization.
- Customer Data Analysis: Retailers can leverage data analytics to gain insights into customer preferences, buying patterns, and behavior. Understanding these trends helps tailor marketing strategies and personalized offers.
- Inventory Management Systems: Retailers may use advanced inventory management systems to optimize stock levels, prevent stockouts, and ensure that popular items are readily available for online and offline shoppers.
- Mobile Apps and Online Platforms: Developing user-friendly mobile apps and online platforms allows retailers to
Data Analysis Is More Important Than Ever
Data and analytics are always important. The insights they offer are even more critical as the pandemic recovery continues. A thorough analysis of the metrics associated with your retail spaces will help you make informed decisions.
For instance, a tenant performance analysis can reveal which properties have done the best throughout the past few years of upheaval. Data on each tenant’s sales, foot traffic, and customer satisfaction are valuable if you have access to such information. An analysis of these metrics can inform discussions about lease renewals, rent adjustments, and other pressing topics.
Market data can be used for a competitive analysis of the retail landscape in your area and the surrounding region. The number of competitors each tenant faces, along with their customer demographics, can help identify growth opportunities that otherwise would have gone unnoticed. If your retail tenants have done any sort of customer behavior analysis, this can form the basis for performance metrics and key performance indicators (KPIs).
The idea is to gather as much real-world data as possible and use it to paint a picture of the true value of your properties. The answers you get may surprise both you and the tenants. With data-driven insights into your properties, you’ll also be better equipped to make decisions on renovations, marketing budgets, and the risks you face in the current landscape.
Needs-Based Planning, With Compromise on Both Sides
To truly get past the post-pandemic recovery period and into a sense of normalcy, an assessment of the impact of remote work is needed. The problem is that the issue is still up in the air. Some tenants may have pushed harder for their workers to return to the office, while others will be content with remote work in the long term.
Moving forward, employers will need to plan for how much office space they truly need. Going back to more robust economic times, adding more office space seemed to make sense. Growing business meant more hiring, which meant more room was needed in corporate offices. Now, with remote work apparently here to stay in some form, it seems likely that businesses will need to shrink their office spaces somewhat.
The question is: How much downsizing is needed? Finding the correct answer will take some open and honest discussion — and some compromise.
With all the reporting on work-from-home and return-to-office scenarios over the past few years, it can seem like you’ve heard it all before. On the other hand, the wide gap between employers expectations and employees happiness might be attributed to neither side actively listening to the other. Only then will each side be able to state their concerns from tracking increased productivity, team visibility, employee engagement and learn if remote work plays a significant role in those organizational KPIs.
It seems easy to understand why a significant portion of workers would want to continue their remote work schedule. The benefits of work-from-home are many and have been discussed at length in media coverage. They include a better work-life balance, reduced commuting costs, more flexibility to deal with family emergencies and other personal commitments, and the ability to focus better on work without the distractions inherent in office environments.
While some or all of those reasons likely apply to every employee who wants to continue remote work, everyone’s situation is different. Some may actually miss the so-called distractions of an office and the social aspects of physical presence. Whereas it used to be annoying when people stopped by their desks to ask how their weekend was, surely some miss seeing their co-workers in person on a regular basis.
However, even those who might like to return to the office or transition into a hybrid schedule might not be able to make those changes easily. As the pandemic re-shaped everyone’s life over the past few years, childcare or transportation concerns may prevent these workers from returning to the office.
Employers should understand, and have compassion for, how situations have changed before making return-to-office mandates. However, employees also need to understand management’s concerns.
It’s been difficult for some managers to adjust to the sudden reality of remote workers. When you can’t easily pull all the key people together in a room and discuss important issues, that’s a big change. Evaluating employee performance or judging how projects are proceeding may also be challenging.
In the end, some compromises will have to be made on both sides. And only then will a clearer picture of office space needs and organizational culture emerge. However, once that picture is clear, it’s time for needs-based planning. If you don’t need a lot of those offices anymore, maybe they would be better utilized if they were converted to conference rooms with teleconference capabilities. There are probably many other good uses for all that “extra” space.
Until the true impact of remote work policies becomes more apparent, landlords have to work with what they’ve got. It would be a mistake to convert all unused office space to accommodate remote work capabilities or to install other technology for tenant engagement purposes. Data, metrics, and analytics must inform decisions.
Comprehensive Lease Accounting Software Is a Necessity
Collecting and analyzing the data that will inform your decisions requires a modern approach to lease accounting software. The software you choose should be a comprehensive package that covers the entire lease accounting lifecycle and all transactions involved. Failure to capture everything means that when you later attempt a data analysis, critical information will be missing. Given the current conditions and the need for all the market insights you can get, you don’t want to miss anything.
Many lease accounting packages are available on the market, but some focus more on the accounting side than lease management. As the pandemic recovery moves along and you’re considering more short-term leases, the need for a full-featured approach becomes apparent. The ideal lease accounting software operates as a single source of truth because it captures data throughout the entire lease lifecycle. That way, everything is available for analytics and metrics.
Think of all the administration associated with your leases and all the critical dates and clauses included. The comprehensive lease management software will include transaction management features that capture all that critical data, making it available for analysis.
As companies have adopted ASC 842, adherence to new lease accounting standards is equally important. With ASC 842’s emphasis on bringing more transparency to the lease accounting process, you could even say the new standards also call for comprehensive lease accounting software. Given the complexities of the current market and the changes in ASC 842, a full-featured software package is almost a requirement.
Occupier: The Streamlined Lease Management Software
Out of all the available options, Occupier is the most streamlined lease management software on the market. Occupier is built upon a modern, efficient technology stack and is designed from the ground up to be the most comprehensive lease accounting software available. As remote work shapes retail strategies, both office occupiers and retail tenants need to understand their real estate portfolio and their customers / employees.
Occupier’s focus on lease management best practices makes it the ideal choice for office occupiers and retail tenants in today’s commercial real estate market. Every aspect of the lease lifecycle is collected with Occupier’s task management and critical dates features. This provides you with the most data so you can better understand your portfolio and your retail tenants.Of course, Occupier is fully up-to-date and compliant with ASC 842. All the changes with the new standard are incorporated into Occupier’s comprehensive approach to lease accounting. To see why Occupier is the best choice for lease accounting and portfolio management, schedule a demo today.