Office landlords, asset managers and tenants alike are facing a significant challenge in 2021 as organisations reassess their workplace needs. We’ve seen that working flexibly is possible, if perhaps not desirable, five days a week, and many businesses are seeking better value from their office space as a result.
The landlord/tenant relationship has fundamentally altered in this context. Faced with the potential for rising vacancies, landlords must demonstrate that they understand and can support the needs of tenants if they want to maintain yields – but how can they achieve that?
Digital connectivity is key. It has to be a cornerstone of workplace investment and asset leasing strategies in 2021 and beyond. Early findings from a study by Backbone Connect into occupiers’ wish lists for the future office suggest that it trumps location and even price when tenants are selecting a new space.
Making connections
Few businesses could function today without good digital infrastructure. It underpins almost all office activity. Despite this, connectivity is often overlooked in workplace fit-outs and asset marketing strategies. Traditionally it has been the responsibility of tenants, not landlords, to source their own digital infrastructure and internet provider. This has to change in 2021.
The way we work has altered irrevocably. Businesses have learnt that operations can run from home, but the loss of team culture and ideas sharing has been felt acutely over the past year, and many are grappling with how to encourage employees back to the workplace once it is safe to do so.
Now more than ever, offices need to become destinations, enabling colleagues to collaborate and socialise as well as think creatively. It’s this change in mindset which has bumped connectivity up the corporate agenda – it’s vital to underpin office brainstorms, meetings and research, as well as enabling employees to dial in from home (or from anywhere else).
The role of the office has changed, but there has also been a shift in market sentiment, which has made in-built connectivity more important. Many businesses have experienced a squeeze on their budgets, meaning that the big upfront costs and long move-in times generally associated with a new workplace are even less palatable now. Setting up digital infrastructure accounts for a large part of these added costs and delays. It typically takes at least three months to get fibre internet installed due to complicated negotiations around wayleaves – that’s time tenants might not be willing to tolerate in the new world order.
Time to step up
What all of this is really driving towards is the need for landlords to make sure they tailor their offer in an ever more competitive market. Some forward-thinking landlords are already responding to the winds of change by moving to more flexible models. A recent survey by Savills showed that 29% of office landlords already operate a flexible offer, with a further 29% planning to develop one.
Asset owners are increasingly adopting blended services within the same building, with shell and core, CAT A, CAT A+ and CAT B fit-outs available to occupiers in the same location. Connectivity has to be front and centre within these plans, rather than an afterthought. Attempts to create a more bespoke, flexible model for tenants could be quickly undone by drawn-out wayleaves or simply an office experience that doesn’t live up to expectations. In fact, connectivity can be an important part of the flexible workspace puzzle; for example a different cybersecurity approach might be needed on multi-tenanted floors.
Landlords have to anticipate the needs of businesses and support them as they transition through the pandemic and out the other side – understanding how occupiers want to work and use space, as well as their wider corporate agendas. We know, for example, that sustainability is fast becoming an important factor in choice of office, as is how the work environment will benefit employee wellbeing. Good digital infrastructure can play a role here too, from powering devices that help businesses track their energy use and reduce carbon emissions, to running air quality sensors that can monitor pollutants in the office environment.
Commercial asset owners cannot rest on their laurels. The past year has caused a structural shift in the landlord/tenant relationship, and collaboration is increasingly crucial if landlords wish to keep their occupancy levels high. Connectivity is a fundamental part of this new model, enabling landlords to support tenants as they navigate the months ahead.
David McLeod is co-founder of Backbone Connect
