Kastle Systems has been in operation for more than half a century, and in relative obscurity for an overwhelming portion of those years.
Then, early in 2020, the coronavirus came along, and all over the world, companies locked out their workers for fear of getting them sick. Then when they reopened their offices, a shockingly large percentage of those workers decided not to come back, for they had discovered they could get their jobs done just as effectively working from home or from some coffee bar.
Kastle, a Falls Church, Va., building security firm, discovered early on that it had the data to track that trend in-house. Thus was born the “Kastle Back-to-Work Barometer,” the go-to measure for real estate press, and press in general, to measure the impact of the virus. It could also help answer the all-important question: Now that the workforce has discovered the joys of avoiding the commute, will they ever come back to the office in as full a force as they did before the pandemic?
The New York Times at the end of February, for instance, cited Kastle’s stats, showing U.S. markets averaging 31 percent of workers back in 10 major U.S. markets. (Commercial Observer cites Kastle regularly.)
Ameet Amin, grizzled veteran of the financial side of commercial real estate and general manager of Kastle’s Northeast region, got on Microsoft Teams in mid-February to chat with Commercial Observer about the company, the barometer and what it all means.
His remarks have been edited for clarity and brevity.
Please tell me how Kastle Systems went from being just another building security company to being the go-to supplier of data on returning to the office.
We pay a lot of attention to what our clients need. Kastle is the country’s first and largest managed security company and a leader in proptech. We got to where we are by always listening to what our customers and their end users need and by constantly innovating.
When the pandemic hit, building owners and managers were left with a huge challenge of determining who was coming into the office and how to layer on services that would not only help people feel more comfortable coming back to work, but also attract them back into the office by delivering a brand experience. That’s when Kastle began to look at our own data on who was actually coming into the office and where.
With that data in hand, we could help landlords begin to make decisions based on better intelligence. For example, if a landlord wants to build amenity spaces that are relevant in today’s way of working, occupancy data is critical to knowing how people are using those spaces and when.
Walk me through the history of Kastle.
The Kastle story is one of big ideas. Five decades ago, when security meant installing a system, Kastle understood that security as a service was the wave of the future. In 1972, Kastle pioneered managed access for real estate owners, and the whole industry changed. Suddenly, premier property owners could take advantage of the latest technology developments without having to become security experts themselves.
Every day we focus on the end-user experience. The experience of the user really matters more so than ever before. Because if they have the choice to work from home, and they have the flexibility to work from home, you need to offer them something that compels them to want to come into the office.
If I have an HQ in New York City, and I want to draw employees, my space had better be on par or above my competition. You don’t need the employee to come into the office and just be there all day.
There is a flight to quality going on in the market. Demand for high quality is at its highest rate probably ever. What we are doing and employers are doing is thinking about how do we drive a brand experience that will attract employees into the office, and so a lot of landlords are thinking about placemaking. So any tenant across the portfolio has a place to come — a hangout place, a play space — all that was not there before.
And, inside the tenant spaces, what employers are doing is trying to create more collaborative and open environments that promote interactive culture. One of the things that is really important for tenants today is to have some level of certainty before making the [capital expense] decision. Landlords have found that they need to have more intelligence built into their decision-making before they make that dollar commitment.
One of the ways they make that is through our occupancy data.
You raised the question of how did our barometer report come about. It was in listening to our customers and understanding their needs, and seeing what data we can provide back to our customers that will help them make decisions.
It sounds like you are helping individual landlords make their space more enticing, so that people will want to come back.
Yes. So, for example, what landlords want to ultimately be able to do is say, “If I create this amenity space, [it] will attract tenants because I have seen there is a flight to quality and high demand for quality space. Are there health and wellness components available in those amenity spaces in the way I want them to be available?” These are the types of things we are helping landlords with.
Clearly amenities have become critical in luring people back to the office, post-COVID. We’ve written about open terraces, food and beverage, fitness, beekeeping, golf simulators, all things you’re not going to have at home. Are you guys seeing other things?
There are two types of amenities. There are table-stakes amenities, which are a lounge space, food and beverage, conference rooms, things like that. And then there are perks and differentiators. We haven’t seen the beehives. A little bit of golf simulators, a lot of landlords are doing them as potential perks, but TBD to see if they will be relevant.
Landlords know that amenity spaces are necessary and attractive. But it allows tenants, when they are thinking of downsizing, to not necessarily have their community space within their tenant space, if the building has sufficient space that they can reserve or access on demand. It’s much more efficient from the tenant’s perspective.
One thing I will mention is that some landlords are looking at having in-house health and wellness, a medical office component to their building that is open to any tenant in the portfolio. So it’s super-easy to get your physical or your prescriptions, and come back down. And one of the rationales is the time spent for an employee to leave the office, travel across the city to see the doctor, and come back, all of that time you just saved.
So you’re measuring the whole wellness concept beyond just riding a Peloton, or having the typical gym amenities.
It’s a convenience play. What are the most common needs for doctor visits, if they didn’t have to travel to go see a doctor, if I have to be on the 15th floor for my 30-minute appointment. So it’s much more efficient. And another reason why an employee might say, “I want to be in that space”
Kastle’s Back to Work Barometer looks at 10 cities. Is there a plan to make it into a 12-city barometer, or a 14-city barometer, and if so where would those cities be [the barometer measures the cities’ metro areas, so it includes the suburbs that surround those cities]?
This year we officially opened up offices in Boston, Seattle, Charlotte and Nashville. We have been more or less operating in those markets for quite some time. But, with the official launch of a dedicated satellite office, we are going heavy into those markets. We would expect once we have enough of a sample size on a par with the others we would incorporate them into our data.
Do you have a sense of when that might happen?
I don’t want to speculate. It could be this year, it could be next year.
Hopefully, we won’t care about COVID in a year. Do you guys get into why office users aren’t eager to return to the office?
We talk to landlords and tenants that we represent. We have about 4,000 spaces on the tenant side, so we have a perspective. [Occupancy is] about 26 percent in New York today. The low was 22 percent. The high was 47 percent for Austin and Houston and Dallas.
A lot of it has to do with mass transit. In a place like New York City, for example, where most people get onto a train or some form of mass transit, they feel less comfortable about that than someone sitting in Austin who can get in their car and drive to work.
The other factor is a lot of people are OK with an hour but if it’s going to take an hour and a half, you’d rather work from home. That’s another reason why New York City has lagged.
It’s been challenging for employers to make policy decisions. Obviously, the omicron spike delayed all those plans.
Of course, there was already a problem — if you want to call it a problem — pre-COVID, with workers who had discovered they could do their jobs on their laptops and didn’t need to come into the office.
The data doesn’t show that, but, anecdotally, if you want to parse it by who you’re talking to, there was a flexible work-from-home culture, and that was more accepted in those environments. If you talk to someone in San Francisco, you’ll get a different perspective than someone, say, in D.C., which is more law firm-heavy.
What was the omicron spike like? Did returning to the office just continue its momentum, or did it significantly slow things down?
I can give you the New York statistics. Early to mid-November , New York was in the high 20s, which quickly dropped to the low teens in mid to late December. We are now at 26 percent, near the levels just before omicron spiked and the holiday arrived.