Chicago-based commercial real estate firm, Zeller Realty Group (ZRG), is masterfully transforming the value in the Midwest commercial office marketplace by leveraging connectivity and proptech solutions to create amenity-based tenant communities.
We caught up with commercial real estate industry veteran and ZRG’s Principal and Chief Operating Officer Bob Six to discuss the company’s repositioning and long-term growth strategy.
Six, who joined ZRG in 2001, oversees management and administration for all of the company’s entities and properties and is also a co-investor.
“While larger landlords are competing with co-working operators like WeWork, we are focused on creating connectivity, community and lowering costs for our tenants,” said Six. “It’s important to ask why are you doing things, rather than keeping up with the Joneses,” he added.
For Six, the opportunity for commercial real estate landlords is to create community through highly amenitized offerings, and ZRG’s recent purchase of the Capital Center in Indianapolis is about doing just that.
The downtown high-rise office complex is comprised of two towers at 201 and 251 North Illinois St. bought by ZRG for $63 million in September and will be outfitted with $12 million to $14 million in upgrades and amenities, including reconfiguration of conference area space and updates to the fitness center.
In addition to the Captial Center acquisition, ZRG acquired three office buildings in Atlanta, 100 Peachtree, Resurgens Plaza and Premier Plaza, earlier this year.
Technology infrastructure drives valuation
Assessing a commercial building’s existing technology infrastructure is among one of the most significant factors involved in driving valuation during acquisition decisions, said Six.
“Part of our valuation is seeing if the building is LEED certified which has a lot of meaning to our end users,” said Six.
“We also look at DAS, access to fiber, how many carriers are in the building, and the amount of room in the risers, which is important for assessing whether we will be able to bring more things in. The age and state of existing technology infrastructure like life and fire safety and elevator systems are also very important.”
Winning amenities arms race
As class A office space becomes more desirable to tenants, landlords and developers are shelling out big money and devoting an increasing amount of square footage and capital to amenities in their office buildings, both new and old.
“Ten years ago a fitness center would be in the basement. Today it needs to be in a prime area where there are large windows,” said Six, who is considering adding conference rooms, meetings areas, boardrooms, telephone rooms, outdoor spaces, and lounges across Zeller’s properties as more companies reduce their office space requirements.
“Many companies are going so small with office requirements, down to 120 square feet per person, that people feel that they can’t breathe,” Six said.
Transitioning from individual to community-focused tenant services
Another critical aspect of ZRG’s strategy has been transitioning tenant services from an individual to a community model. While concierge services are of great value to individuals, they not as effective at building the community as a whole said Six.
ZRG recently introduced a new community engagement manager at its 100 Peachtree property whose role is to create a dynamic workplace community through event programming and custom services. In addition to facilitating tenant-to-management relations, the core role of a property manager is also creating partnerships with community organizations in downtown Atlanta, including area theater districts, universities, and other civic institutions.
ZRG plans to provide similar opportunities for engagement by curating customized tenant experiences through concepts like book and travel clubs, tastings, and speakers about topics relevant to the tenant community.
“We have the opportunity to have a WeWork-like experience for pennies on the dollar. The same deal for a more value-oriented price” said Six.
Remain ahead of the curve through tech and talent
As the commercial real estate industry transitions from physical asset management to generating user-centered tenant experience building apps are becoming commonplace.
Many landlords including CBRE have already introduced tenant apps, and while ZRG is considering adding the technology to their buildings, they are still in the process of selecting the right application, said Six.
Six’s advice to building owners is to always remain ahead of the curve by being open to engaging young talent who understand technology and innovation to gain a broader perspective.