property Landlords, tenants and the office of the future
As the new year begins, the commercial property world continues to live with the far-reaching impacts of the Covid-19 pandemic. Following its enforced springtime evacuation, one segment under particular scrutiny is the commercial office market. Petra O’Shea, head of sales, Morgan Lovell takes a close look at the market
There is undoubtedly a paradigm shift in businesses’ portfolio strategy and the consequences for the industry are now unfolding. Leaders are increasingly taking the ever-developing requirements of their employees into account. The overall effect in this new territory is to revisit and revamp business models, with portfolios realigning accordingly.
Landlords and asset managers can find comfort in the words of SunTzu: “in the midst of chaos there also lies opportunity”. Working from home has – to a point – been successful and people will continue to benefit when company policy allows.
But this mass experiment has also brought into sharp focus our desire and need for face-to-face contact in a safe, collegial and supportive office environment. The office of the future will be re-imagined and landlords (and their advisers) have an instrumental role to play.
Flexibility and simplicity
Within the vortex of anxiety and uncertainty, 2020 has reinforced our focus on achieving the basic needs; we want our lives to be as easy as possible, we want to be able to make good choices for ourselves and our families, and we want to live and work in a healthy and positive environment.
No business or individual wants to be locked into a future that is economically restrictive or psychologically negative. These new ‘rules’ are driving business, and landlords that recognise and are willing to work towards accommodating them will fill their space by engaging in new and productive relationships.
Flexible location and space strategies
Business models need to pivot in response to many unforeseen stresses. Diversifying location strategies is a way to relieve financial pressures and achieve countless other goals.
Appetite for traditional city-centre office space will bounce back, but the menu on offer will need to cater to a wider variety of tastes. Tenants previously content with traditional blank canvas CAT A space will expand their horizons, seeking out CAT A + or fitted spaces.
These fully finished “plug and play” offices will operate alongside shared services such as reception, meeting, catering, showers or dry cleaners. Tenants will look to move in and operate without any complicated fit out other than perhaps tweaking the design to reflect their brand.
Where that office is located, what size it is, how effectively it supports our wellbeing and what level of digital solutions are on offer presents new opportunities for both landlords and tenants. These will be exposed in a future which is driven by conversation and collaboration.
Morgan Lovell’s workplace consultants and office designers have been closely attuned to the cycles of the commercial property market for over 40 years. During recent months, we have engaged with many landlords, asset managers and tenants. We have understood and respected their changing perspectives and gained valuable learning from the evolution of their business requirements. The journey ahead for all these parties will be characterised by opening up to new ways of working, applying creative solutions to differentiate space and acting on a determination to enter into agile partnerships.
Extracts from that learning are detailed here
There is genuine potential in the future of this market and we believe the key to unlocking it lies in the following:
Simple lease terms and mechanisms
Businesses will only thrive in the future by being agile – continually adapting and frequently assessing their plans. This creates a demand for shorter leases and greater flexibility in their mechanisms such as rent reviews and tenant obligations.
A corresponding reluctance from tenants to invest in capital expenditure will be accompanied by an acceptance of additional operating costs for the right ‘smart space’ that suits their needs.
This means landlords and their advisers will participate far more with the fit out of their spaces, where possible matching their offer to a tenants’ specific requirements.
‘If you build it, they will come’ is a phenomenon of a bygone time. To attract the best businesses and differentiate their space, progressive landlords will go-
THE BUSINESS MAGAZINE – JANUARY/FEBRUARY 2021
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