Owners of Securitized Buildings Starting to Realize the Importance of “Soft” Services

Differentiation from competitor buildings is hard to achieve through development of “hard” facilities

In July 2018, the JLL Japan Real Estate Management Service Department held its first “whiskey seminar” event for tenants at grade-A office building CONCURRED Yokoyama, which the agency master-leases. The maximum capacity for the participative event was 80, and applications flooded in. The capacity was filled in just three weeks since the application period began, and even more people showed up on the day of the seminar—it was a huge success.

The event was planned and organized by Masanori Ohashi, Chiaki Izumisawa, and Kosuke Karibayashi, all members of the JLL Japan Real Estate Management Service Department Office Team. Ohashi explains why they held the event. “The wave of developments is nearing the Minato Mirai area, which is very close to this building, and there will be a huge supply of grade-A office space in the center of Tokyo—just 30 minutes away by train—by 2020. We foresee that competition over tenants will become even more fierce. In addition, wider use of IoT has made it possible to work anywhere. Now, you don’t need to work at an office in the city center. It is expected that location will not be the top priority in selecting a place to set up an office. These two points are the reasons why we thought to improve tenants’ satisfaction levels by proving unique ‘soft’ services. Our ultimate goal is to get the tenants to stay for a long time.”

Japanese developers taking the lead

As a matter of fact, there are more grade-A buildings that hold events and seminars like the one JLL held for their tenants. This kind of approach is called “soft” services, in contrast to a building’s “hard” facilities and design, and is implemented by Japanese major developers. It has become hard to differentiate the “hard” qualities of one building from another as a result of advancements in architectural technology. On the other hand, “soft” services with ingenuity can set a building apart from competitor properties. Providing a special unique experience will add to the building’s value. A well-known example is an event called “Birukon,” launched by Mitsui Fudosan in the Nihonbashi area. It is a networking event for people working in offices owned and managed by the real estate company, and it aims to form a bridge between tenants in the same building so that they can help each other in the event of a natural disaster. MORI Building also holds futsal tournaments, golf competitions and so on for workers in buildings it owns and manages, including Roppongi Hills. Mitsubishi Estate, NTT Urban Development, MORI TRUST, and others are also putting effort into “soft” services.

However, these developers are only focusing on providing tenant services in flagship buildings that their company groups own and manage. They can budget for these events because they own and manage the buildings all together. On the other hand, if a building is owned by another company, it may be difficult for a PM, who is in charge of facility management, to put more effort into tenant services, because the building owner may be reluctant to bear the cost of the services.

Recently, however, JLL is receiving more and more inquiries about enhancing “soft” services from building owners who are investment funds and are committed to maximizing investors’ returns. It suggests that they are starting to realize the importance of these services. Providing “soft” services has become mainstream in the whole office industry.

Highly reputed by participants

Now, what did the participants think of the event? “A beverage manufacturer that tied up with us for the seminar said that they had never had 80 people participate in a whiskey seminar before. In the participant survey, a lot of people gave positive feedback too, and a lot of people requested us to do more similar events,” says Izumisawa. It appears the participants thought very highly of the event. The beverage manufacturer—JLL’s partner in the event—was a company whose vending machines are installed in the CONCURRED Yokoyama building. We used a rental meeting room in the building, and bought snacks that go well with whiskey from a tenant on the 1^st floor, which was a restaurant. “We made arrangements so that the beverage manufacturer could use the event as a promotional activity, and the tenants of the building could enjoy the benefits as well,” comments Izumisawa.

Meanwhile, competitor buildings in Yokohama’s business area are also stepping up their “soft” services. JLL’s task for the time being will be to make use of its uniqueness as a foreign real estate service company in order to continue holding cost-effective events. In order to do so, we have high expectations for the abundant creativity of young JLL employees who joined the company after graduation this year, like Karibayashi. Karibayashi, who became involved in the event as soon as he joined the company, is enthusiastic. “Making a building more attractive to tenants through ‘soft’ services is a chance to show my skills as a project manager, and I find it very rewarding.” JLL is going to accumulate this kind of experience and know-how, and provide high-value-added management services to building owners in the future.

The profitability of an office building as an operating asset is dependent on the quality of its management and operations. In the U.S., common service charges include the cost of tenant services, and tenants bear the cost because they appreciate the value of the services. Though the shift has taken a while, planning skills are now required of project management in Japan, as well.