CBRE’s SVP Todd Siegel has spent the better part of nearly two decades focused on integrating retail into mixed-use environments. Siegel’s team and KBS have long been fixed on identifying consumer trends ahead of popularity, while also developing strategy on integrating those needs into the office envelope — all with the goal of better serving tenants. Siegel’s strategy is simple: understand the customer journey, maintain authenticity, and build a world-class environment that strikes an emotional appeal.
With workforce tenants no longer tethered to desks, each day has a much different dynamic. In turn, stewards like Siegel need to ensure that the most appealing and serviceable ecosystem is created — from the front door and back again.
“At the end of the day, we hope that the environment we create leads to a more efficient, happier and productive work force,” said Siegel.
Recently, we sat down with the CBRE executive for his thoughts on his unique strategic approach and to address how mixed-use assets can be designed to better serve the consumer.
Q: What’s the ideal combination of amenities for a mixed-use commercial real estate building?
Siegel: There isn’t a global catch-all solution. Introducing an amenity to an asset is specific to the building, the surroundings, and most importantly, the inhabitants. As we look to plan and build individual ecosystems, we’re forever mindful about the offerings that may exist across the street or within the general proximity of a marketplace.
Mixed-use properties (and their respective populations), in addition to their surrounding environments, also vary greatly in scale. A strategy that we may deploy in midtown Manhattan isn’t necessarily something that we would consider in suburban Minneapolis. The reality is, we may overdo it on the amenities in Minneapolis, whereby we wouldn’t necessarily need to do the same in midtown Manhattan where the market overcompensates for itself.
As we look across the entirety of the KBS portfolio, we’re constantly asking ourselves “what can we do to ensure that our buildings are best in class?” and “what concepts still in R&D can we invest in that will enable customers to experience them first?”
For example, at Accenture Tower in Chicago (a 2.5-million-square-foot building), we worked for nearly three years on the development of a 3,000-square-foot retailer that introduced the first cashier-less grocery concept. Time and time again, we’ve worked exceedingly hard to ensure that our tenants have exposure to concepts that have never been deployed, and that they have the ability to experience things that are new — not just to a particular market, but on a global basis.
Q: Do amenity enhancements help minimize the risk of owning, or investing in, mixed-use assets?
Siegel: There’s always the possibility of risk, which is why we meticulously consider those amenities that will have the greatest appeal and functionality to the building’s current or incumbent demographic. From a portfolio standpoint, our strategy is to avoid being standardized from one asset to the next. The solutions we build and drivers we deploy are completely customized to the project.
We believe in the adage “authenticity is timeless.” Just after defining our customer, we move to develop an authentic experience for both asset and consumer. If we’re building in Dallas, we want to make sure that we’ve instilled a local Dallas flavor. That’s a different tactic than we would take if we were in, say, San Francisco or Chicago. Each of the markets in which we operate has a special culture and uniqueness that is especially important to tap into. It’s part strategy, of course, but it’s also a balancing act between providing the right mix of local, national and, sometimes, international experiences — then, fine-tuning each
aspect/experience to the needs of the end user. The bottom line is that the buildings and environments we build thrive. Risk is averted due to increased visitation and happy workers, as well as tenants who renew because of our attention to detail and continued commitment to evolve and stay ahead of consumer trends.
Q: How important is location for a mixed-use property?
Siegel: It’s interesting. Over the course of time, we’ve seen all building classes take on some form of “mixed-use” or another. Nevertheless, density still determines the ultimate level of programming. We have integrated amenity programs into hotels, multi-family, industrial storage facilities and call centers. As for location, the best example throughout our portfolio is probably the recent redevelopment of Accenture Tower in Chicago. The level of institutional firms across a myriad of industries are continually moving closer to this urban core — located just west of the central CBD. The seismic shift is being driven toward a submarket where the residential density is younger and much more heavily populated on a per-square-foot basis. What this overarching theme really signals to us is that companies are in search of accessibility to talent and the ability to recruit and retain talent.
This theme is not specific to Chicago. We’re seeing it across the United States and throughout all asset classes. Fundamental to the cause, our job is to assist with it — helping out clients to recruit and maintain talent wherever and however possible.
Q: Speaking of Accenture Tower, do your retail tenants generally prefer short- or long-term leases at Accenture Tower?
Siegel: Accenture Tower is a bit of an outlier. Our tenants at this asset generally want as long of a lease as possible, and the asset enjoys a tremendous amount of consumer traffic on a daily basis. Very few assets in North America are home to 15,000 daily office workers and also have over 200,000 daily commuters passing through them as does Accenture Tower and the Ogilvie Transportation Center which is located in the building. Additionally, the asset sits surrounded by a substantial subset of daytime office workers. As a result, retailers in this building enjoy a tremendous level of success.
Our retailer sales-per-square-foot at Accenture Tower are about 75% higher than Chicago’s CBD office market comparable. That’s based on the incrementally higher number of consumers who comes through the building on a daily basis.
Alternatively, in large part, retailers today are looking for shorter terms. They’re looking for options — all trying to better gage sales potential and occupancy costs. They’re looking for flexibility in their strategy, recognizing that the disruption that exists in that space will most likely continue. Accenture Tower happens to buck the trend with the ability to better underwrite consumer traffic patterns and overall spend.
Q: How does your retail strategy at Accenture Tower influence your business tenants?
Siegel: When Accenture Tower was built, it already had an exceptional number of consumers who not only called the building home but also commuted through it on a daily basis. So, for all intents and purposes, one would have thought that it would have been home to a well-curated and current mix of retailers. The reality is, that until KBS’ acquisition, ownership had not taken a holistic approach to integrating the retail into the building’s overall experience — for the office tenant and commuter. In partnership with KBS, our team at CBRE developed a clear vision statement that vows to “attract first-market users and best-in-class operators throughout our ownership tenure to ensure that the experiences we were building and offering to our tenants was continually setting new standards and raising the bar for the ‘KBS experience.’”
Today, we’re applying the same model across all our assets. By evaluating our retail tenant mix across the entirety of our portfolio and envisioning new partnerships to create, brands to attract and concepts to integrate, we are ensuring our offerings continue to evolve and redefine the experiences we create.
In developing this strategy for Accenture Tower over the last five years, the point where we really pivoted is in the collaboration that we have built with our retailer partners, helping them to them design stores, execute strategy, innovate and grow. This is at the forefront of our core and the infancy of what we envision to be a winning strategy.
Learn more about mixed-use properties and it’s growing popularity with KBS Insights.