Hybrid workplace

The Future of Corporate Real Estate Portfolios

Mary Carnes
April 24th, 2024

The landscape of corporate real estate investing has changed drastically in recent years. After emerging on the other side of a global pandemic, companies everywhere have been forced to reevaluate what is considered a sound real estate investment. Couple that with the unpredictability of interest rates, and you’re left with an unusual predicament.

What was once viewed as a smart investment for business owners may now be considered the opposite. In this article, we’ll begin by providing an overarching explanation of a traditional real estate portfolio, the benefits of real estate investments, and common investment strategies you may come across.

We’ll then magnify the lens to corporate real estate specifically. You’ll learn how corporate real estate portfolio management has changed and what you can do to ensure you’re left with a rock-solid real estate portfolio.

With the increase in hybrid and remote work and the fluctuating occupancy rates, employee attendance, space utilization, and general workplace experience that come with it, it’s more important than ever to identify inefficiencies in your corporate real estate strategy and opportunities to cut costs and streamline your workspaces.

Real estate portfolio management in a hybrid office

Insights and strategies for aligning your real estate portfolio with hybrid work models and business objectives.

What is a corporate real estate portfolio?

Corporate real estate is any property owned or leased with the sole intention of assisting business operations. Investing in CRE differs from investing in commercial or residential properties because you’re not seeking a profit from the initial investment, you’re seeking operational support.

Examples of corporate investment property may include the business headquarters, manufacturing plants, branch offices, collaboration spaces, etc. Current market trends suggest corporate real estate strategies are changing, so what should real estate investors prioritize?

Why are corporate real estate portfolios changing?

The general population is shifting towards a more employee-centric approach to leadership. Now more than ever, business owners and executives cater their business models to accommodate their current and future employees’ needs. As a result, we’re seeing an increase in initiatives like hybrid work models, more prioritization on flexibility, and an emphasis on sustainability in the real estate market.

These market trends directly impact how business owners invest in corporate real estate. A real estate investor must consider all these factors before investing in a corporate property and when evaluating their current portfolio management.

Shifting towards a hybrid model? It might be best not to invest in a traditional office space. A shared collaboration space, on the other hand, will significantly reduce your monthly operating costs while providing your team with the necessary resources.

Below are some of the main reasons why real estate investment portfolios look different than ever.

The rise of remote and hybrid work

As I briefly just mentioned, the standard office space is dying. There has been a collective shift in what the general workforce values in a job— and one of those core values is the choice to work wherever one wants. This has a direct impact on your property value.

This new business model has forced many business owners to rethink their real estate investment strategy and decision-making in both the short term and the long term. Why purchase or rent an office building for half of the space to go unused? As a result, we’re seeing a steady rise in investments in coworking spaces and the optimization of offices to better conform to how employees are using them.

Purchasing office buildings is still considered a smart investment overall. People will always yearn for in-person interactions, and some of the best ideas are developed by simply putting a few people together in a room and brainstorming. The key for investors, stakeholders, and facilities managers going forward will be to purchase the right amount of office space and use it in the most efficient way, not necessarily cutting out office spaces altogether.

The prioritization of flexibility and agility

If there’s one thing the pandemic taught all of us, it’s that we all need to be able to adapt to sudden change. Many investors are also applying this philosophy to their real estate investment portfolios.

Countless CEOs and property managers directly felt the pandemic’s impacts on their business operations and real estate investments. Of course, no one could’ve prepared for the entire world being shut down, but it still left many thought leaders wondering, “How could we have been better prepared?”

With the benefit of post-covid hindsight, companies are using what happened in 2020 as a reminder to always have a backup plan (or two) in place. Instead of opting for a 10-year leasing contract forcing you to be locked into one space, consider streamlining real estate investments and getting more out of the workspaces you already have.

Employee experience is more important than ever

Employee workplace experience can be broadly defined as the overall feelings and attitude an employee has toward the business, the staff, leadership, and the environment they’re working in. The employee experience can be divided into three key components: culture, technology, and the workplace. We are seeing organizations pay more attention to employee experience than ever before.

Employers are finding that many employees don’t want to sit in an office building for nine hours a day, five days a week—especially those who have the ability to complete many of their job tasks remotely. This leads to fewer in-office mandates and puts more power in the hands of the workers.

Focusing on employee experience can lead to the following:

  • Improved communication between teams
  • More opportunities to bring on new talent
  • A more enjoyable environment to work in
  • Lower turnover rate

Emphasis on sustainability

Companies everywhere are doing everything they can to reduce their environmental footprint and create a sustainable business model for the long term. Not only does reducing your carbon footprint benefit the global climate as a whole, but it also buys you goodwill with current and future employees.

This focus on sustainability is changing the way all businesses invest in and utilize their corporate real estate. It’s not just manufacturing plants that release harmful emissions that are now being put under an even finer microscope lens. This also applies to facilities managers making decisions about energy efficiency, renewable resources, sustainable office supplies, and other green initiatives.

As a result, we’re seeing companies prioritizing sustainability both in how they approach their real estate strategies and how they look at space utilization.

AI & data analytics provider deeper insights

The emergence of AI has impacted just about every professional industry. Commercial real estate and office space management are no exceptions. With industry-changing workplace analytics tools, such as those provided by OfficeSpace, business owners can get a more refined look into the use of their office space and how their employees are navigating that space.

AI and workplace analytics can provide hard data that will help influence future decision-making. IoT sensors, employee badge systems, Wifi logins, and smart building technology provide a wealth of real-time information about how your workspaces are being used. This data can include metrics such as employee attendance and presence data, space utilization, room booking frequency, and where there is unused space in the office.

By collecting and analyzing this data, CEOs and business owners can decide if their investment property is worth holding onto or if they need to implement changes to better adapt their office spaces to the needs of their workforce. If the data indicates that office space isn’t being used as originally intended, it may be time to streamline your workspaces.

It should go without saying that in order to have a successful real estate portfolio in the corporate world, you should consider all of the factors listed above. Stay in touch with your local market. Keep an eye on workforce and workplace strategy trends. Put people first. Follow these basic but essential tenets, and you’ll be left with a real estate portfolio you can be proud of.

The future of corporate real estate investing

Now you’re aware of some of the biggest reasons why the corporate real estate market has changed. Factors such as sustainability, employee experience, and the rise of AI have all impacted what we consider to be a sound investment. So, where does corporate real estate investing go from here?

It’s unlikely the trend of employee-centric leadership initiatives will go away any time soon. The general workforce has more input than ever before, getting to decide when, where, and how they want to complete their work. Whether they want to or not, companies are forced to adapt to the evergrowing need for a flexible, employee-first workplace experience.

Businesses are likely to continue moving away from long-term real estate contracts and oversized spaces in order to cut costs, choosing instead to focus on optimizing existing spaces to fit new hybrid and remote working models.

What changes can real estate investors implement today?

Getting out of a long-term rental or leasing contract can be a logistical nightmare and will most likely take up tons of your time and financial resources—in most cases, both. You’re not going to fix your real estate portfolio overnight, but there are steps you can take to move towards better future investments. Here are some efforts you can make today to begin better optimizing your office spaces.

  • Start investing more in your employees and less in real estate. Directing your financial resources towards improving the employee experience will make workers want to join your organization and stay there. Listening to your employees will grant you a clearer picture of the necessary real estate you need to accommodate their needs.
  • Embrace the rise of AI and data analytics. AI isn’t going anywhere. Learn how to best employ automation, analytics, and AI to eliminate inefficiencies and improve decision-making.
  • Listen to your financial advisors. There’s a reason this profession exists. Sit down with an advisor to discuss your financial goals, where you’re running into trouble, how to cut out bad investments, and where your resources will be best spent.

How Office Space is changing the standard office landscape

OfficeSpace Software is a leading workplace analytics company committed to optimizing your workspaces to meet your needs. Through data analytics and AI tracking technology, OfficeSpace customers can get an in-depth view of how their office is being used. Collect and analyze data from a variety of sources, presented on easy-to-use dashboards and visualizations, so you have all the information you need to make the best decisions about your corporate real estate portfolio.

Visit the OfficeSpace website today to learn more about their industry-changing technology.