Weathering the
Economic Downturn
with VTS
The VODI tracks unique new tenant tour requirements, both in-person and virtual, of office properties in core U.S. markets and is the earliest available indicator of upcoming office leasing activity as well as the only commercial real estate index to explicitly track new tenant demand.
Demand for office space & average requirement sizes are down.
Amid shifting hybrid work patterns and rising interest rates, new demand for office space has declined over the past year.
According to our latest VTS Office Demand Index (VODI), demand for office space is still about half of the pre-pandemic benchmark and down 15% year-over-year.
1
2
3
1
New Requirement Velocity in Gateway Markets
Change in average NER vs. Pre-Covid highs
2
3
Realizing those tenant footprints will likely decline upon expiration, now is the time to leverage VTS insights to be proactive, take action, and transform risk into opportunity.
1
Step
Identify high-value tenants with large amounts of cash flow at risk.
01
Use the VTS Platform to gather crucial customer relationship context and inform your retention strategy.
02
Flag any upcoming expirations and identify the correct time to follow up and take proactive measures.
TERMS
TERMS
OPTIONS
CUSTOMER SENTIMENT
Using VTS Lease, identify and understand the options available to your tenants alongside important notice dates.
OPTIONS
TERMS
OPTIONS
CUSTOMER SENTIMENT
You’ll gain the
insight you need to evaluate customer relationships
using VTS. These insights will inform next steps.
CUSTOMER SENTIMENT
TERMS
OPTIONS
CUSTOMER SENTIMENT
Mitigate revenue risk and prepare for the bear with the VTS Platform
Bring your space to market.
04
A practical step-by-step guide for asset teams
Average NERs across the country have yet to reach pre-COVID highs.
With the VTS Platform, you have the tools and insights you need to capitalize on every opportunity
The VTS Platform is the only modern platform for the CRE business user. Every businessperson in commercial real estate is given workflow tools to do their jobs with unparalleled speed and intelligence - and the use of these tools creates data for executives to uncover strategic opportunities.
VTS is the only platform that can help every persona across organizations make and execute better strategic decisions.
Marketing Automation
& Management
Content management
Publishing of space
Performance analytics
Leasing
& Asset Management
Tenant
& Property Experience
Investment
& Asset
Strategy
Deal Pipeline Tracking & CRM
Transaction Modeling
Portfolio Risk Analytics
Tenant Experience Apps
Property Operations
Utilization Analytics
Market Valuation Insights
Tenant Demand Insights
Portfolio Performance Insights
Learn More about the VTS Platform
SCROLL DOWN
SCROLL DOWN
SCROLL DOWN TO SEE EACH STEP
STEP 3
BACK TO TOP
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Leverage market data to uncover strategic opportunities and validate a go-to-market strategy.
03
Forecasts for an economic downturn paint a cloudy picture for the office market
NEXT
NEXT
NEXT
SEE STEP 1 IN ACTION
Identify high-value tenants with large amounts of cash flow at risk.
01
STEP 2
Figma, Inc.
Completing step one, you identify a high-value tenant with a lease term that will expire in two years’ time.
Rather than wait until the lease expires, you decide to do some digging.
See these steps in action
Let’s walk through a hypothetical situation
BACK TO STEP 1
Next, you gather crucial context. Looking at terms, options, and customer sentiment data, you pulse-check your relationship with this tenant
Here’s what you discover:
Your relationship with the tenant is generally strong. The onsite property management team has logged mostly positive interactions with customers in VTS Lease, and with VTS Rise data you confirm this anecdotal sentiment by seeing how customers are using the building. But while they enjoy the building, only 50% of their employees are coming in on a regular basis. They are a happy customer, but their needs have changed, and their footprint will be shrinking.
With these crucial insights, you identify an opportunity to offer a creative deal that serves your tenant’s need to downsize without harming your asset as a whole.
BACK TO STEP 2
STEP 3
2
Step
VIEW FULLSCREEN
3
Step
Let’s move to step three. Using VTS Lease and VTS Data, you can examine the current in-place rent and cross-compare against similar spaces in the industry.
You determine that the in-place rent from the tenant looking to downsize is only slightly above market. The team then decides to pursue an early restructure with the tenant.
You agree to restructure their lease and reduce their footprint — for an additional 7 years beyond the current expiration in 2025 to 2032. This substantially increases the WALT of the asset.
Now the question becomes - should you bring the floor you’ve taken back to market as-is, or break it up into smaller spaces? Leveraging VTS Data, you learn that most of the active demand in the market is for smaller spaces, and FIRE tenants are driving the lion’s share of touring activity. What’s better, they’re paying higher average rents than other industry groups.
As a result, you decide to take one of the floors the tenant returned to you and construct three smaller suites. VTS Data helps inform pricing and the ideal brokerages to target.
Weighted Average Lease Term. A metric that measures how much contract rent remains across all tenants at the property.
Financial, insurance, real estate, and flex providers
All proposed terms from new deals in the last 6 months vs. 6 months prior - NYC, Class A & Trophy, 36+ mo term
Deal Economics
While that strategy makes sense in a vacuum, there are other factors at play, like free rent and downtime which may make this strategy less advantageous.
Here’s where the combination of VTS Lease and Data comes into play.
By using deal economics data as the foundation for your Market Lease Assumptions (MLAs), you’ll be using real-time inputs for the first time ever to analyze forward-looking outcomes for your strategy in Lease, rather than relying on data that more accurately reflects an outcome aligned with 6 or 12 months ago.
Using more accurate MLAs will grant you a more accurate read on your budget, and therefore your evaluations
Market leasing assumptions are a set of inputs based on current market conditions and are used to produce budget predictions and valuations after a tenant lease expires.
Market leasing assumptions are a set of inputs based on current market conditions and are used to produce budget predictions and valuations after a tenant lease expires.
STEP 4
4
Step
4
Step
Moving into step four, you build out three new spaces. Now, you need to bring them to market.
With VTS Market, you automatically deliver context-rich virtual content for your spaces across every marketing channel and measure its impact.
BACK TO STEP 3
Capitalize on every deal opportunity.
05
5
Step
STEP 4
5
Step
Leveraging VTS Market analytics, you can monitor the performance of various campaigns and see if FIRE companies are actively looking at your spaces. Quickly you identify that Zoom Video Communications - a sought-after, regional tenant, is looking at space.
While Zoom Video Communications isn't a FIRE tenant, they’ve been viewing your space. And since they've been growing substantially as a business, it makes sense that they would be looking for additional space to accommodate their growth.
You then discover that Zoom Video Communications is already a customer and has an upcoming expiration in your portfolio. So you dig a little more.
Your leasing team reaches out and confirms that they are looking to expand.
There are a few ways this could play out:
One: You end up leasing the remaining spaces by Q4 2024, equating to substantially
less downtime had you not done anything. The tenant would have relocated in 2025.
Two: If not, you can still go after FIRE tenants. You win either way.
SCROLL DOWN
1
2
3
Average NERs across the country have yet to reach pre-COVID highs.
NEXT
Realizing those tenant footprints will likely decline upon expiration, now is the time to leverage VTS insights to be proactive, take action, and transform risk into opportunity.
SCROLL DOWN
SCROLL DOWN TO SEE EACH STEP
SEE STEP 1 IN ACTION
STEP 2
3
2
SEE STEP 2 IN ACTION
SEE STEP 3 IN ACTION
STEP 4
BACK TO STEP 3
SEE STEP 4 IN ACTION
STEP 5
BACK TO STEP 4
STEP 5
SEE STEP 5 IN ACTION
BACK TO STEP 5
STEP 2
2
Step
You’ll gain the insight you need to evaluate customer relationships using VTS. These insights will inform
next steps.
CUSTOMER SENTIMENT
TERMS
OPTIONS
CUSTOMER SENTIMENT
Using VTS Lease, identify and understand the options available to your tenants alongside important notice dates.
OPTIONS
TERMS
OPTIONS
CUSTOMER SENTIMENT
Flag any upcoming expirations and identify the correct time to follow up and take proactive measures.
TERMS
TERMS
OPTIONS
CUSTOMER SENTIMENT
Use the VTS Platform to gather crucial customer relationship context and inform your retention strategy.
02
SEE STEP 2 IN ACTION
STEP 3
STEP 3
BACK TO STEP 2
3
Step
Leverage market data to uncover strategic opportunities and validate a go-to-market strategy.
03
SEE STEP 3 IN ACTION
STEP 4
The VODI tracks unique new tenant tour requirements, both in-person and virtual, of office properties in core U.S. markets and is the earliest available indicator of upcoming office leasing activity as well as the only commercial real estate index to explicitly track new tenant demand.
Financial, insurance, real estate, and flex providers
BACK TO STEP 3
STEP 4
All proposed terms from new deals in the last 6 months vs. 6 months prior - NYC, Class A & Trophy, 36+ mo term
Deal Economics
Financial, insurance, real estate, and flex providers
4
Step
Bring your space to market.
04
SEE STEP 4 IN ACTION
STEP 5
STEP 5
BACK TO STEP 4
5
Step
Capitalize on every deal opportunity.
05
SEE STEP 5 IN ACTION
SCROLL DOWN
BACK TO STEP 5
Weathering the
Economic Downturn
with VTS
SCROLL DOWN
VIEW FULLSCREEN
Forecasts for an economic downturn paint a cloudy picture for the office market
Amid shifting hybrid work patterns and rising interest rates, new demand for office space has declined over the past year.
According to our latest VTS Office Demand Index (VODI), demand for office space is still about half of the pre-pandemic benchmark and down 15% year-over-year.
The VODI tracks unique new tenant tour requirements, both in-person and virtual, of office properties in core U.S. markets and is the earliest available indicator of upcoming office leasing activity as well as the only commercial real estate index to explicitly track new tenant demand.
SCROLL DOWN
1
New Requirement Velocity in Gateway Markets
Demand for office space & average requirement sizes are down.
NEXT
Change in average NER vs. Pre-Covid highs
NEXT
Mitigate revenue risk and prepare for the bear with the VTS Platform
A practical step-by-step guide for asset teams
Leveraging VTS Market analytics, you can monitor the performance of various campaigns and see if FIRE companies are actively looking at your spaces. Quickly you identify that Zoom Video Communications - a sought-after, regional tenant, is looking at space.
While Zoom Video Communications isn't a FIRE tenant, they’ve been viewing your space. And since they've been growing substantially as a business, it makes sense that they would be looking for additional space to accommodate their growth.
You then discover that Zoom Video Communications is already a customer and has an upcoming expiration in your portfolio. So you dig a little more.
Your leasing team reaches out and confirms that they are looking to expand.
There are a few ways this could play out:
One: You end up leasing the remaining spaces by Q4 2024, equating to substantially
less downtime had you not done anything. The tenant would have relocated in 2025.
Two: If not, you can still go after FIRE tenants. You win either way.
Moving into step four, you build out three new spaces. Now, you need to bring them to market.
With VTS Market, you automatically deliver context-rich virtual content for your spaces across every marketing channel and measure its impact.
All proposed terms from new deals in the last 6 months vs. 6 months prior - NYC, Class A & Trophy, 36+ mo term
Deal Economics
Let’s move to step three. Using VTS Lease and VTS Data, you can examine the current in-place rent and cross-compare against similar spaces in the industry.
You determine that the in-place rent from the tenant looking to downsize is only slightly above market. The team then decides to pursue an early restructure with the tenant.
You agree to restructure their lease and reduce their footprint — for an additional 7 years beyond the current expiration in 2025 to 2032. This substantially increases the WALT of the asset.
Now the question becomes - should you bring the floor you’ve taken back to market as-is, or break it up into smaller spaces? Leveraging VTS Data, you learn that most of the active demand in the market is for smaller spaces, and FIRE tenants are driving the lion’s share of touring activity. What’s better, they’re paying higher average rents than other industry groups.
As a result, you decide to take one of the floors the tenant returned to you and construct three smaller suites. VTS Data helps inform pricing and the ideal brokerages to target.
While that strategy makes sense in a vacuum, there are other factors at play, like free rent and downtime which may make this strategy less advantageous.
Here’s where the combination of VTS Lease and Data comes into play.
By using deal economics data as the foundation for your Market Lease Assumptions (MLAs), you’ll be using real-time inputs for the first time ever to analyze forward-looking outcomes for your strategy in Lease, rather than relying on data that more accurately reflects an outcome aligned with 6 or 12 months ago.
Using more accurate MLAs will grant you a more accurate read on your budget, and therefore your evaluations
Next, you gather crucial context. Looking at terms, options, and customer sentiment data, you pulse-check your relationship with this tenant
Here’s what you discover:
Your relationship with the tenant is generally strong. The onsite property management team has logged mostly positive interactions with customers in VTS Lease, and with VTS Rise data you confirm this anecdotal sentiment by seeing how customers are using the building. But while they enjoy the building, only 50% of their employees are coming in on a regular basis. They are a happy customer, but their needs have changed, and their footprint will be shrinking.
With these crucial insights, you identify an opportunity to offer a creative deal that serves your tenant’s need to downsize without harming your asset as a whole.
Identify high-value tenants with large amounts of cash flow at risk.
01
Identify high-value tenants with large amounts of cash flow at risk.
01
STEP 2
BACK TO STEP 1
Figma, Inc.
Completing step one, you identify a high-value tenant with a lease term that will expire in two years’ time.
Rather than wait until the lease expires, you decide to do some digging.
See these steps in action
Let’s walk through a hypothetical situation
1
Step
Content management
Publishing of space
Performance analytics
Deal Pipeline Tracking & CRM
Transaction Modeling
Portfolio Risk Analytics
Tenant Experience Apps
Property Operations
Utilization Analytics
Market Valuation Insights
Tenant Demand Insights
Portfolio Performance Insights
Marketing Automation
& Management
Leasing
& Asset Management
Tenant
& Property Experience
Investment
& Asset
Strategy
The VTS Platform is the only modern platform for the CRE business user. Every businessperson in commercial real estate is given workflow tools to do their jobs with unparalleled speed and intelligence - and the use of these tools creates data for executives to uncover strategic opportunities.
VTS is the only platform that can help every persona across organizations make and execute better strategic decisions.
With the VTS Platform, you have the tools and insights you need to capitalize on every opportunity
Learn More about the VTS Platform
BACK TO TOP
SCROLL DOWN