Landlords want to bulk up their office amenities, and a rush of startups are selling them tech to do it

WeWork

Mobile apps have handed customers more choice and convenience, meaning many may be starting to demand more when it comes to office space

• WeWork brought consumer branding to the office. While some look to flexible office providers like Convene and Industrious to amenitize their space, some landlords and operators would rather do it on their own.
• Tenant experience startups like Lane, Equiem, and Comfy aim to connect landlords and property operators with people who use their space, and possibly sell more on-site goods and services.
• Deloitte's 2020 Commercial Real Estate Outlook report, published last week, found that most of the 750 real estate executives surveyed rated tenant experience as their top priority.
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With Kombucha taps and yoga classes at lunch, WeWork has ushered in a new focus on services for tenants in commercial real estate. Now that WeWork has helped to create this demand, many traditional landlords feel like they have to catch up.

The concept is simple: keep workers' day-to-day experiences in mind when it comes to office space, and use amenities as a tool to recruit and retain employees and clients.

Mobile apps have handed tenants more choice and convenience, meaning many may be starting to demand more in terms of service when it comes to office space.

While some look to flex office providers like Convene and Industrious for that amenity-laden gloss, others would rather do it on their own. Tenant experience startups like Lane, Equiem, and Comfy are looking to connect landlords and property operators with the people who use office space.

Deloitte's 2020 Commercial Real Estate Outlook report, published last week, found that most of the 750 real estate executives surveyed rated tenant experience as their top priority.

And landlords, who may now see the relationship with tenants as more complex than a monthly check and a lease negotiation every decade, are beginning to spend heavily on tenant experience tech. And 70 percent of the exes said they would maintain or even increase their tech spending even in the face of an economic slowdown. Still, according to Deloitte, less than half say they can do it better than competitors on their own.

This August, office services and amenities provider Equiem raised $8.4 million in equity. The company claims that was the largest fundraising round ever by a tenant experience startup. An uptick in funding, the Deloitte report, plus the inclusion of a panel devoted to tenant experience at the upcoming CREtech New York conference, suggest landlords and property operators are turning more to tenant experience startups instead of outsourcing entirely.

• Read more: 'We see everything that happens': Real-estate data is changing the game -execs at Cresa, Niido, and other firms explain why

Why now?

Gabrielle MacMillan founded Equiem in 2011 while she was working with Lorenz Grollo, a Melbourne, Australia real-estate titan.

Grollo's Rialto Towers opened in 1986 as the tallest building in the southern hemisphere, but by 2011, multiple buildings had eclipsed it, and an anchor tenant had moved out. Grollo worked to revitalize the building to compete with new offices in the city, and tasked MacMillan with finding a way to use tech to connect the building's operators with everyone who worked in it.

"There are 4,000 people who work here everyday," MacMillan remembers Grollo saying. "I want to know who they are. I want to know their preferences and then I can curate this experience for them."

MacMillan built what became Equiem, which is now used by over 145,000 office workers in Australia, the UK, the United States, and other countries.

Equiem was founded a year after WeWork, and both companies were part of a larger shift in real estate. Instead of thinking of tenants as a monthly check, more people in real estate are trying to tie in consumer-facing tech. For WeWork, this led to what they called a "space-as-a-service" approach. But others looked deeper into the technology.

"We're not space-as-a-service," said Kofi Gyekye, chief product officer and cofounder of tenant-app startup Lane. "We're a technology company that provides the right tools for our clients in the space, so that they can provide the best service."

"The landlords want to do what the premier anchor clients want," said Erica Eaton, chief of strategy and operations at Comfy. "What do they want? A workplace that can be an asset for attracting and retaining talent."

WeWork has its own app that connects user and, until recently, allowed them to make purchases at WeWork's "honesty markets." Landlords are getting in the game, too. Rudin Management, Boston Properties and WeWork's Dock 72 in Brooklyn will be serviced by its own app which will combine control over heating and lighting with the ability to order food and access the building.

Read more: WeWork's competitors are scrambling to distance themselves from the co-working giant, but many are following the same script

Why bother with flashy amenities?

This change to a focus on tenant experience has been driven by the bottom line.

Workers want an office space that gives them a higher quality of life, and companies need to attract these employees with more than just a traditional salary and benefits package in a tight labor market.

Many tenant experience platforms connect to so-called internet of things systems, giving tenants control over temperature and lighting. Deloitte's study found that almost three-quarters of execs believed that tenants would pay at least a six percent premium for a building with those kinds of features.

Tenant technology can also drive revenue by connecting customers with food, laundry, fitness, and parking. While that helps make money for the building, the startups are also looking to provide data about the usage of on-site amenities that they say can be of value to customers.

The real estate industry as a whole is looking to catch up in collecting and analyzing data.These learnings are reported building-by-building, but the tenant-experience companies also claim they can help see trends on a larger scale.

"There are clear differences in different regions, but the funny thing is that there are actually really strong alignments when it comes to human behavior," MacMillan said.

Equiem told Business Insider that it has seen tenant interest in wellness programs across all locations, as well as a gradual increase in selling on-site goods and services to tenants through apps. MacMillan did note that certain locations have their own quirks.

She gave the example of dry cleaning in the office, which has been a hit everywhere but New York.

"Nobody wants to bring their laundry to work in the subway," MacMillan said.

HqO says that it can help predict demand for amenities largely based off of the type of tenants in a building and where the building is.

Chase Garbarino, cofounder and CEO of HqO, told the story of one amenity provider that brings massage chairs to a building's lobby. It first brought the chairs to a building of young, technology and media professionals in downtown Boston, with no success. Now the chairs have been brought to an office with an older workforce in suburban Boston, and they've been booked for months.

What's next?

While firms are pouring money into tenant experience tech, those companies valued at $10 billion or more are more likely to cut spending in a downturn, according to Deloitte. This could mean that the biggest players already have large investments in the space.

Comfy, which was founded in 2012, has seen this manifest as an increase in "momentum and a growth in demand." According to Comfy's Eaton, more clients will give Comfy more chances to collect data, allowing it to get better at picking out trends like employee morale, amenity use, and energy consumption.

"In two to three years, we'd like to have benchmarks across our entire client base," Eaton said.
"When these data pools get big enough, you can start to do some interesting benchmarking - 'Across finance institutions, this is how you stack up.'"

The tech is aimed at putting all the things people might do during a workday into one place, for example, offering a person their lunchtime Pad Thai order, a maintenance request, and cardless access through one app.

"We want to be the nervous system of any workplace," Gyekye said about Lane, though the quote could be applicable to any tenant experience platform.

Some, like Lukas Balik, co-founder and CEO of Spaceflow, see this software as applicable to all real estate, not just office space. The company has started to expand to residential buildings and wants to continue growing there.

When it comes to office space, the trend could be towards a consolidation among new companies, mirroring what many think is imminent among flexible office providers. In theory, the value of each company should grow as it collects more data.

"This is going to be a winner takes all, or most, space," said HqO's Garbarino.