While the battles between work-from-home employees and return-to-work managers continue, office landlords are searching for ways to reliably improve operating metrics in their buildings. And sometimes, the old ways are the best ways. New research published in January quantifies the landlord benefits of just keeping your existing tenants happy, and those benefits are significant.¹

The researchers mapped results from a widely used tenant satisfaction survey against office leasing activity, finding that a one-point satisfaction increase (on a scale of one to five) implied a nearly 9% greater likelihood to renew, a nearly 12% greater likelihood to recommend the building, and a 23% lower likelihood of moving out.

Unsurprisingly, improved tenant satisfaction also directly tied to better building performance. A 10% improvement in tenant satisfaction drove higher rent growth - by nearly 1% annually for effective gross rent - and a lower vacancy rate.

There’s plenty of research in other industries, especially retail and service industries, on the benefits to a firm from high customer satisfaction. But this is the first micro-econometric evaluation of tenant satisfaction on demand for office space. What’s less clear is why the industry waited this long because the data was always there: The researchers used the Kingsley data set - the industry standard - and reviewed more than 55,000 tenants covering 2,900 buildings in 74 cities from 2009 to 2023. That’s a big study.

Notably, the relationship between tenant satisfaction and improved metrics at the building was strong prior to COVID and remained after the pandemic. So did the effect of sustainability attributes - better indoor environmental quality in particular. .

The market backdrop matters here. Office vacancy in the U.S. dropped to 14% by yearend 2025, down from its record 14.2% mid-year, per CoStar. (It was 9.2% in 2019.) Some of that improvement reflects absorption, but the market can also thank near-zero supply growth, as 40 million square feet of office was delivered last year - the least since 2011 - while more than 35 million square feet was removed for repurposing or redevelopment. Scratch the surface and you’ll see lease sizes remain 15–20% below the pre-pandemic average, and the lion’s share of leasing activity is going to trophy and other Class A assets.

Put yourself in the seat of an office landlord. Think about how valuable an office lease renewal is - all the downtime you don’t have to support, all the TI and leasing commission you don’t need to pay, etc. Think about how hard organic rent growth is to manufacture in an average asset. In that is the context, you need any tactic you can find to keep your building leased, and this research gives you one on a silver platter.

The research revealed more subtle findings than the headline relationship between tenant satisfaction and building performance. Tenant satisfaction is significantly higher and more stable in Class A buildings; tenants in class B and C assets cluster at similarly lower levels.

A tenant’s renewal intention unsurprisingly tracks with the tenant’s overall satisfaction, but the “results indicate that tenant satisfaction not only affects tenants’ self-reported commitment but is also a strong predictor of their actual leasing behavior.” You can see this in the average vacancy rates. In the graph below, buildings with lower tenant satisfaction scores have higher vacancy rates.

A key finding of the research - something that got us wondering about a possible investment strategy: Improving tenant satisfaction has a non-linear impact on property performance. In other words, improved tenant satisfaction is particularly accretive to buildings that have low tenant satisfaction scores to begin with. “When the tenant has a lower satisfaction score, the effect of improvement will be higher.” That suggests a thesis around buying buildings with low - ideally very low - satisfaction scores, and bringing to them a customer-centric management approach. Think of us when you IPO.

That finding also suggests chasing perfection in Class A buildings may be a waste of time. Improving tenant satisfaction when tenants are already happy does little to help building performance. Above a certain threshold, incremental satisfaction gains don't move the needle much on performance.

The value of this research is that it puts numbers behind something most landlords already suspected but likely didn’t want to invest in without better data. The payoff is measurable: renewal probability, rent growth, vacancy — all move in the right direction. And if improving tenant satisfaction is especially accretive in buildings where satisfaction is currently low, then operational improvement may represent a real, and measurable, value-add opportunity. More broadly, the paper made us wonder how much insight may still be hiding in operational data the other asset classes already collect. We want to see similar studies across the other major property types — especially multifamily — because if tenant experience can move the needle this much in office, you sure would think the impact would be significant where someone actually lives.

Who: GROPYUS

What: An innovative and popular new way for homeowners to tap into their home equity.

The Sparkle: We wrote last month about the lack of productivity growth in real estate construction, and we’ll hit that subject with Dr. Peter Linneman in the next issue of Stacked, and all of it has us thinking about how hard it is to get housing built efficiently.

The data suggests it’s been nearly impossible. So we like to see groups trying to build better, and Austria-based Gropyus just raised another 100 million euro to expand its factory that produces walls and ceilings for multifamily assets, bringing total funding to 400 million euro. Gropyus specializes in timber construction.

In a research paper we reviewed recently we found a graph of collective REIT property ownership as of 2018. The concentration by asset type is easy to see. We were surprised multifamily ownership is not more distributed - it’s the least distributed of all the asset types.

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