We recently caught up with the busy executive for his thoughts on KBS’ strategy for acquiring and enhancing assets.
First off, can you share a little about the KBS acquisition strategy?
Location is critical to the KBS acquisition strategy: how and where people live and work. We look for areas that are well-positioned for long-term growth supported by strong local employment, friendly business environments, access to transportation and amenities, and expanding demographics. We especially like — and have experienced great success — in secondary markets, many of which have proven to be more resilient recently compared to their primary/gateway counterparts.
What are some key characteristics KBS looks for in an asset?
We hear a lot about “work-life balance,” which in a post-pandemic era is more important than ever. Highly-amenitized buildings or those close to lifestyle amenities that make the workdays of tenants and their employees more enjoyable, collaborative, and convenient. KBS also looks for buildings with good floor plans that offer more flexibility to create unique and exclusive experiences.
KBS’ modernization strategy is key to the success of its assets. What does this entail?
KBS takes a very holistic approach to each property. We look at every element and detail to determine what to keep, what to eliminate, and where there is value-add potential. Sometimes this entails small improvements to common areas in an already top-quality property; other times it means starting with a building that may be a few years old or is not as competitive because of lackluster amenities. KBS then makes strategic enhancements that are unique to that property and that market — elevating it — knowing that these improvements will create long-term tenant satisfaction, which directly impacts both the income and the value of the property. Our goal is to better serve our tenants by understanding their journey, which aligns with KBS’ strategy of owning and operating best-in-class commercial real estate.
Property improvements are an expensive expense. How does KBS manage this?
Providing our tenants with a premier work environment takes capital. Something we evaluate and underwrite before every deal we make. If we over–leveraged all of our properties, we would have less capital to make critical enhancements to other KBS assets. These improvements are an essential investment that allow our tenants to attract and retain employees.
Additionally, KBS continues to research and implement ESG initiatives at our properties, including the integration of EV car-charging stations, internet connectivity certification through WiredScore, and our recent verification completion of more than 14 million square feet of Class A office space in our portfolio to achieve the UL Verified Healthy Building Mark for Indoor Air.
KBS also recently appointed a new ESG manager, Apaulo Malloy, who will help direct the company’s ESG efforts as a proactive strategy to drive a more sustainable future. She’s is part of the company’s new “Green Team,” working to identify and track KPIs for our ESG goals. Apaulo will spearhead initiatives that will fortify our overall strategy and better serve KBS’ tenants and partners.
Please give an example of a KBS property modernization project.
A good example is Accenture Tower, a top-tier, 1.46 million square-foot trophy office tower in downtown Chicago, Illinois. Here, KBS recently completed more than $22 million in upgrades, including a new office lobby inspired by the hospitality industry, a state-of-the-art conference center with a pre-function area, a contemporary tenant lounge featuring an outdoor terrace in a garden like setting, with two fire pits. More employers are returning back to the office and rely on landlords to help attract their teams back to the workplace.
Located in high job-growth markets, our properties are home to some of the biggest companies in the world. Our success stems from cultivating prime commercial real estate communities for our tenants, who through their employees, innovation and pursuit of change, cause local businesses to thrive and create a higher demand for commercial real estate.
To learn more about commercial real estate and trends in retail, visit KBS.com/Insights.