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News & Insights

How CRE is Transforming Our Surroundings

  • November 2, 2021
News & Insights

How CRE is Transforming Our Surroundings

  • November 2, 2021
The pandemic has brought a myriad of changes, much of which will have a permanent impression on commercial real estate (CRE). One of the most notable is the shift in consumer behavior and the impact on the environment around us.

While singular properties will always have their place within each market, mixed-use assets have demonstrated they can check a lot of boxes in markets where the live/work/play experience continues to be a demand driver, especially with emerging talent pools.

Changes are underway as shifts in health and wellness, social equity, demographics and household formation, and the way we do business, have led to new protocols and demands: 

  • Multifunctional spaces 
  • Proximity to work and home 
  • Conversion of unused spaces 
  • Real estate automation 
  • Consumer-centric technology 
  • The rise in health and wellness centered amenities

Emerging from the pandemic, CRE has a unique opportunity to leverage the protocols mentioned above and integrate an ecosystem that promotes well-being and community engagement ¾ within office, retail, multifamily, and even mixed-use assets.

Office: Expect future office to focus on agility and customizability. The shortage of talent coupled with a new hybrid workforce has prompted office owners/operators to reimagine the physical space to incorporate a compelling professional experience that’s symbiotic with tenants’ personal lives. Traditionally, this experience largely depended on a building’s amenity package. The more bells and whistles, the more attention the building garnered. And it worked. A recent Cushman & Wakefield study found that pre-COVID-19, highly-amenitized buildings had an 18.3 percent rent premium over their counterparts. The premium was even greater in central business districts (CBD). But now, there is some debate whether elaborate amenities (i.e., bowling alleys, golf simulators, rooftop decks, and high-tech fitness centers) will hold the same cachet as before. Or will the “less is more” philosophy take center stage?

The future of the office environment ¾ and a successful return to those offices ¾ is highly contingent on how safe occupants feel. It’s fair to assume that while amenities will always be king, the health and wellness approach (decompressed density, flexible workspace, smart technologies, uninterrupted connectivity, and more green space) will become a core strategy in future office design and development.

Retail:  The thriving e-commerce industry catapulted the industrial sector into unprecedented growth, while the existence of brick-and-mortar shopping districts were threatened. CRE must innovate and focus on accessibility and flexibility as part of their strategies to lure people in. Many retailers are offering previously considered luxury conveniences and add-ons to the everyday shopping experience, including curbside pick-up, walk-up/drive-thru services, convenient exchanges/returns and 24/7 customer service access.

For some additional food for thought, here’s a quick snapshot by Nelson Worldwide that suggests certain retail profiles’ potential:

  • Strip malls/shopping centers: Everyday shopping centers with grocery/mass retail service providers need to be refreshed and positioned as more active community participants.
  • Open-air centers: Open-air shopping destinations, which offer many health benefits, will continue to gain traction.
  • Sport-anchored developments: Pending health and safety guidelines, projects centered around sports venues will need to assess capacity and flow, while maintaining fandom.
  • Outlets: Discount-driven retail needs to strategically invest to ensure they’re truly destination-worthy.

Multifamily: This sector has weathered the COVID-19 pandemic generally well. There was significant migration from urban cores to the suburbs as people — primarily Millennials and retiring Baby Boomers — sought out more affordable and family-friendly dwellings, communities, and the “American Dream” experience. This trend should continue, but properties proximate to mixed-use or lifestyle destinations will get the most play.

Mixed use: Embodying the principles of diversification, mixed use assets can help balance the scale of gains and losses to sustain a property. It also adds directly to a property’s relevance and resilience, because it’s designed with various end-users in mind. Mixed-use can also help galvanize new joint ventures and partnerships, give access to capital and improvements, increase sales, and generate greater leasing demand.

When planning out programming for properties such as Accenture Tower, a 40-story office and retail building in Chicago’s West Loop, KBS created environments that are designed around consumer needs. It is mindful of the amenities offered on-site compared to those that may exist across the street or within a vibrant community marketplace. As in the case with Accenture Tower, the asset is considered one of the most well-located transit properties in the entire CBD, complete with an on-site bank, on-site courier service, and on-site storage, as well as a concierge service, fitness center, and parking. Along with its flexible design options, Accenture Tower offers a unique lifestyle experience that stands out in that market.

Conclusion: The pandemic has taught us that anything can change without notice, and by taking a more holistic approach to projects, these properties — whether expansive mixed-use or single-use assets — will offer a valuable tenant experience. It’s this strategy that could better equip a property to adapt and thrive in times of disruption.

KBS has led the way in modern mix-use properties, where communities can live, work, shop and play. Click here and here to learn more.

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Industry Trends

Underwriting the Perceived Instability of Short-Term Office Leases

  • February 16, 2021
The threat of shorter office lease terms has been looming over the commercial real estate industry for several years. Companies first braced for the potential impact of new standards from the International Accounting Standards Board (IASB) recognizing all leases on the balance sheet, which took effect in January 2019. Then, the office leasing world was hit with additional challenges from COVID-19 as many companies opted to work from home and re-evaluated the role of their physical office space.
Industry Trends Insights

Envisioning the Future of the Built Environment

  • January 29, 2021
Amidst the ongoing crisis, built environments are at the front lines of change and will play a huge role in creating a more resilient world going forward. Office architects are re-envisioning the future of the workplace—where and how we work. Unfortunately, there is no crystal ball to predict exactly what the new future-oriented office will look like, but what we do know is flexibility and adaptability will be key in resilient design.
Industry Trends

Why Texas is becoming a commercial real estate powerhouse

  • January 21, 2021
It looks like 2021 will be another big year for Texas, a year when a lot of major companies will make the jump and move to the Lone Star state. Just look at these transitions:
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