CRE's comeback strategy: Rebuilding the tenant experience
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Transcript
The commercial real estate sector has experienced more disruption in the past five years than it did in the preceding two decades. Shifting work models, health concerns, e-commerce shifts, and economic uncertainty have led to widespread vacancies and a reevaluation of how spaces are utilized.
But commercial buildings aren’t standing still. Owners and operators are turning disruption into opportunity by redefining property value through experience-focused upgrades, facility optimization, and smart amenities.
A new definition of value in commercial buildings
Property value used to center on square footage, location, and lease terms. Today, it’s also about adaptability, efficiency, and the tenant experience. Commercial property managers and facility managers are rethinking how to attract and retain tenants with a focus on creating spaces that foster productivity, well-being, and long-term ROI.
Office vacancy rates remain high in many markets, but Class A buildings with upgraded amenities are outperforming their peers. The National Office Report from CommercialCafe notes that Class A office properties continue to attract interest, especially when they integrate wellness features, sustainability initiatives, and tech-enabled operations.¹
Table sources: US Office Market Report |Q1 2025; Why Class A Office Buildings are Outperforming in 2025; Commercial Real Estate Industry Outlook 2025: Hidden Market Shifts You Can’t Ignore
Class A: Outperforming on leasing and retention
Leasing Activity
- In Q1 2025, nine of the ten largest office leases in Downtown Chicago were signed in Class A properties, with four of those in trophy buildings, showing a strong tenant preference for premium spaces.2
- Across major U.S. markets, Class A buildings have experienced positive net absorption in early 2025, while Class B and C buildings continue to lose tenants.3
Tenant Retention and Demand
- The “flight to quality” trend remains dominant, with nearly 60% of companies surveyed considering moves to higher-quality spaces, prioritizing amenities, location, and modern infrastructure.4
- Class A office rents are now 84% higher than those of non-prime (Class B/C)properties, proving tenant willingness to pay for quality and amenities.4
Vacancy Rates
- Despite outperforming on leasing, Class A vacancy rates can be slightly higher (often around 21%) due to the volume of new supply and large tenants vacating space, but these buildings still attract the majority of new leasing activity and renewals.3
Class B and C: Facing mounting challenges
Higher Vacancies and Negative Absorption
- Class B and C properties have experienced a significant uptick in vacancy rates and continued negative net absorption, as tenants consolidate or upgrade to Class A buildings.5,3
- Between Q1 2020 and Q1 2024, prime (Class A) properties absorbed 49 million square feet, while non-prime (Class B/C) properties lost 170 million square feet of tenants.4
Declining Rents and Increased Concessions
- Landlords of Class B and C buildings are increasingly forced to lower rents and offer aggressive incentives to attract or retain tenants, with concessions now accounting for 26% of U.S. lease terms4,5.
- Many Class B and C properties are being removed from the market through conversions or demolitions due to persistent vacancies and a lack of demand.4
Experience is becoming a core tenant expectation
The shift toward hybrid work and flexible schedules hasn’t made the office obsolete. In fact, as of mid-2025, national office attendance is generally 70-76% of pre-pandemic (2019) levels. In Manhattan, for example, office attendance had reached 76% of pre-pandemic levels by March 2025, with an average of 57% of office workers present on an average weekday.6
This shift in occupancy has forced a reimagination of commercial building purposes. Employees need a reason to come in, and employers are looking to justify their real estate investments. That means tenants are seeking more from their spaces.
Amenities that once felt optional (such as on-site fitness centers, green spaces, and smart lighting)are now essential to delivering a high-quality tenant experience. These features are also central to supporting employee retention, company culture, and productivity, which puts pressure on property managers to deliver value beyond square footage.
Mixed-use developments are reshaping commercial space
One of the most noticeable trends in real estate development is the rise of mixed-use properties. These developments combine commercial, residential, and retail spaces in one destination, creating a more integrated lifestyle experience for tenants.
By blending spaces, building owners can diversify their revenue streams, increase foot traffic, and create a more engaging environment. It’s a strategy that aligns with how people want to work and live, especially in urban areas.
From an operations standpoint, mixed-use developments introduce new complexity. Maintenance plans must be aligned across building types, and energy management needs to adapt to different usage patterns. Facility optimization becomes a foundational priority.
Operational upgrades lead the way
As commercial property owners adapt to new tenant expectations, many are investing in building upgrades that prioritize energy efficiency, indoor air quality, and service transparency.
Smart Building Technology
Smart building technology has moved beyond simple upgrades to become a strategic differentiator in commercial real estate. Today’s leading properties use intelligent HVAC systems, advanced occupancy sensors, and mobile-enabled platforms to create responsive, sustainable, and highly personalized environments.
AI-powered HVAC and real-time occupancy data optimize comfort and energy use, often reducing costs by up to 30% while supporting ESG goals.7 Mobile integration empowers tenants to interact with building services instantly, boosting satisfaction and engagement.
The real advantage comes from integrating these technologies into a unified, data-driven ecosystem, enabling proactive management, seamless tenant experiences, and a clear edge in attracting and retaining top occupiers. In 2025, smart building technology isn’t just about efficiency; it’s about redefining what a modern workplace can be.
Preventive Maintenance
Facility maintenance in commercial buildings is no longer just about repairs; it’s about long-term asset performance. Planned maintenance strategies reduce downtime, improve comfort, and boost the bottom line. Tenants will feel the effects of any shortcuts or forgotten maintenance aspects.
Sustainable Operations
Sustainability in building operations has evolved from a differentiator to a baseline expectation. Today’s tenants—especially those in the millennial and Gen Z workforce—actively seek out green-certified buildings and demand tangible, measurable improvements in energy efficiency. In some U.S. markets, the premium for leasing sustainable office space can reach as high as 28% over standard office buildings, especially for spaces with advanced certifications or features. 13
- Green-certified buildings (such as LEED or BREEAM) are now a core requirement for many occupiers, not just a marketing bonus.
- Tenants are increasingly scrutinizing sustainability credentials, prioritizing features like energy-efficient lighting, smart HVAC systems, and wellness certifications.8
- EV chargers have proven to increase occupancy rates, retention, and satisfaction among tenants.9
- Sustainable upgrades—like advanced HVAC, LED lighting, and water-saving fixtures—can reduce operating expenses by 14% to nearly 30% compared to conventional buildings.10,11
- Green buildings typically consume up to 25% less energy, resulting in significant long-term savings for both owners and tenants.12
Building sustainability is now an expectation, not a bonus. Tenants want green-certified buildings and measurable improvements in energy efficiency.
These upgrades not only appeal to tenants but also help building owners manage rising costs, navigate labor shortages, and future-proof their portfolios.13
Facility services make the difference
While high-end finishes and open floor plans catch attention, it’s the behind-the-scenes work that makes commercial real estate truly competitive. Facility services, including janitorial, HVAC, lighting, and energy management, play a critical role in both operational success and tenant satisfaction.
Companies that partner with integrated facility service providers can streamline building operations, reduce overhead, and offer a more responsive tenant experience. As property owners face tighter margins and tougher competition, outsourcing facility management has become a strategic lever for both performance and profitability.
The future of commercial real estate is flexible, efficient, and tenant-first
There’s no single solution for every commercial building, but the winning strategy is becoming clear. Rebuilding tenant loyalty starts with optimizing building performance, creating positive daily experiences, and investing in the systems that keep everything running behind the scenes.
Facility management in commercial real estate is no longer just about upkeep; it’s about elevating the value of every square foot. In a competitive market, experience is the new differentiator, and operations are the foundation that makes it possible.
To stay ahead, commercial real estate owners and operators need more than upgraded finishes; they need a partner who understands the connection between facility performance and tenant satisfaction. ABM helps optimize every square foot with integrated services tailored to your property’s needs. Let’s work together to turn your building into a competitive advantage.
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Sources:
1 CommercialCafe National Office Report
2 Downtown Chicago Q1 2025 Office Market Report
3 Flight to Quality: Why Class A Office Buildings are Outperforming in 2025
4 Market Analysis Guide: Office Properties in 2025
5 Why Are Class B and C Office Spaces Seeing the Greatest Drops?
6 Return to Office Reaches 76% of Pre-Pandemic Conditions
7 How AI Models are Enhancing HVAC Design and Performance
8 What Tenants Want in 2025 CRE Expectations are Changing
9 5 Benefits of EV Charging Stations for Businesses
10 The Many Benefits of Green Building Certification
