Indispensable MCs

Dmitry Sveshnikov, COO of O1 Standard discusses the following in an interview to CRE Commercial Real Estate magazine:

  • New trends in office property management
  • The growing role of management companies
  • Tenants’ most common post-pandemic requests

Investment loyalty

Before the pandemic, people rarely thought about what management company (MC) operated their building, as long as everything functioned properly and looked presentable. Of course, the concept of presentability differs depending on the class of the facility. Today, however, the interaction between the MC and the tenant is much more intense, since MCs perform increasingly more functions that the tenants used to outsource. Even more importantly, the number of contacts between the end user and the MC has increased, primarily due to the new sanitary and epidemiological requirements. Therefore, our key concept, namely, that the management company needs to create a comfortable and healthy atmosphere for the end users and aim to increase their loyalty, is more relevant than ever. We have always said that we work with the tenants, or even more broadly – with the tenants’ employees, rather than with the owner. Ultimately, their satisfaction with the building translates into tenant loyalty, which is an integral part of a building’s investment value.

The Covid crisis has only strengthened the role of the MC in ensuring tenant loyalty and the functioning of the business center as a whole. New functions, which were not assigned to management companies in the past, have been added: construction project management, landscaping, “green” certification… The key change, however, is the rapid development of PropTech, automation of the MC’s business processes, building management and tenant/MC interaction. Automation technology has been on the market for several years now, but it has mostly been used in new high-end buildings. All tenants, even beyond the premium segment, are currently considering it. Lockdowns have raised the question of how to preserve the efficiency and quality of service that the tenants have grown accustomed to – but with a smaller team. Business center attendance fell below 5%, most of the management staff worked remotely, except for those who ensured the life-sustaining business processes in the building. BMS systems solve this problem from the engineering point of view. Meanwhile, the “front office” question remains an open one: i.e., the issue of visitor reception service (minimal traffic did exist at the facilities since many companies worked continuously throughout the pandemic), and the request system. During the pandemic, we started working on a MC/tenant interaction system. Today we are testing the capabilities of access control systems using a mobile app, and evaluating the technologies for controlling, analyzing and optimizing the consumption of a building’s resources.

Green narrative

At this time, we are actively developing our “green” building management expertise as part of the project to improve the buildings’ environmental performance. The concern with the environmental performance of offices is growing following the expansion of the sustainability agenda in the business sector. As companies restructure their own business processes, tenants examine the extent to which their office meets the modern environmental efficiency requirements. This year, our team has added an environmental expert who is a certified BREEAM and FitWel assessor. A full-time specialist with these skills will allow us to significantly expand the range of our services, both improving our internal building management practices, and certifying tenant facilities and offices according to international environmental performance systems. We are already planning to re-certify some of our facilities according to the BREEAM standard. Just to clarify: BREEAM has New Construction certificates, which are obtained in the process of construction and are valid indefinitely. We, on the other hand, are mostly obtaining BREEAM-in-use certificates, which are provided at the building commissioning stage and need to be verified every year. Often ignored in the past, the question of a building’s environmental efficiency and the specific certificate to confirm it was raised more and more often during the pandemic by potential tenants.

Why has it become so important? When the self-isolation regime was drawing to a close, tenants began reflecting on the ways of getting people back to the office. That’s when the connection between a comfortable office atmosphere and environmentally efficient technologies gained great relevance. Companies began to realize that in order to prevent personnel infections at work, they needed to do more than provide masks and ensure social distancing: they also had to think about the building’s engineering systems and the frequency of their monitoring and maintenance by the management company. On the other hand, it is much easier to get people back to the office if it offers more than just a comfortable workplace: supplementary infrastructure, the possibility of resolving everyday issues right in the building, a productive working atmosphere and so on. We always say that a “green” office is not only about the environment: it is also about user comfort, about how a person feels in the workplace where he spends 8–9 hours a day. The BREEAM certification system is already venturing into this sphere, and systems such as FitWel and Well simply put the human experience at the forefront.

It seems to me that over time an environmental certificate will become one of the requirements for confirming a facility’s top-tier status. Recently, my colleagues and I discussed the fact that our office classification system – A, B, C – is very outdated and needs improvement. If the market opts to revise it, the environmental certificate is very likely to become a requirement for class A business centers, and even more so – for premium-class properties.

One-stop management

There are many factors that determine the success of a business center, and one of the TOP 5 questions tenants ask concerns the issue of infrastructure quality. All over the world, class A offices are being transformed into multifunctional spaces where you can get a diverse range of services in addition to the regular lunchtime food outlets. The pace of life is accelerating, traffic congestion in the metropolis is growing, so the chance to manage household and leisure issues right at the workplace is appreciated now more than ever. Prior to the pandemic it was only a matter of convenience, but it is now a safety matter as well. In the past, people wanted to have a specific bank’s ATM in the building lobby, and now they may need a vending machine with supermarket food delivery, or an online order pick-up point.

We periodically conduct customer surveys that include questions about the additional services that we can implement. The impressive summary list of last year’s requests contains 140 items, ranging from tire fitting to a swimming pool.

During the pandemic, the demand for the one-stop operation principle has become greater than ever before. Tenants reduced the number of external contractors, preferring to outsource certain types of office maintenance work to the building’s MC. It’s more convenient both in terms of logistics and the efficiency of request fulfillment under partially remote work conditions. In the tough 2020 we won 43 office maintenance tenders, and also received an incredible amount of client requests for additional work. Compared to 2019, in 2020 the number of requests increased 2.5-fold. The growth rate is preserved this year, too: in Q1, we completed 7–8% more additional work than planned.

According to statistics, unscheduled maintenance of air conditioning components, specifically, cleaning and disinfection of reusable filters, is now the most frequently requested service. Office cleaning using the cold fog method, general cleaning, minor construction work, examination of design solutions, installing additional equipment on premises – the range is quite diverse, but in one way or another it all boils down to improving the office and making it safe. Understandably, during the pandemic, tenants tried to save on operating costs in every possible way, but, as a rule, the savings are funneled towards prevention and disinfection measures.

There was also a distinct request from other owners for consulting services, such as a technical audit, an audit of the operating cost budget, etc. The tenants’ office quality requirements are increasing, and the owners of real estate facilities, especially those for whom it is a non-essential business, are now wondering how to evaluate the quality and efficiency of a management company’s work.