The office sector is in “a full state of flux”, with just 14% of occupiers believing their existing portfolios align with their business objectives.
That’s a key finding from a new report on the future of the office by the Urban Land Institute and the Instant Group, to be launched at EG’s pavilion at MIPIM today.
The survey questioned 285 office occupiers, landlords and third-party advisers in North America, Europe, Asia Pacific, the Middle East and South America, and also included interviews with industry experts and the findings of two roundtables.
Landlords (80%) and occupiers (75%) expect greater lease flexibility and agility over the next five years. “In a sense, the leasing relationship will need to become more of a partnership between the landlord and occupier,” said Craig Hughes, chief executive of partnerships at the Instant Group.
As leases change, 62% of landlords expect a decrease in capital values with the current valuation model, which only awards long-term contracts. The report authors said valuations need to acknowledge the value of providing additional services and amenities, as well as brand and reputation.
ULI Europe chief executive Lisette van Doorn said: “Our study shows that despite the state of flux that the office market is in, physical workplaces remain key for businesses to attract and retain talent, convey corporate culture and enhance employee productivity. However, occupiers have not yet fully worked out how much space they would need and which types of spaces. As a result, they need a flexible approach from landlords partnering with them on this journey.”
Hughes added: “It is clear that there is a real opportunity for asset owners to deliver fundamental change in the office market. The research shows that landlords will significantly benefit from discovering how to meet occupiers’ rapidly evolving demands for sustainable, flexible and amenity rich spaces. By better aligning to occupier expectations and incorporating flexible workspace products and services into portfolios, we estimate owners can realise a potential 30% uplift of net operating income whilst also building stronger customer relationships.”
The report will be launched at a 17.15 drinks reception at the EG pavilion, stand C20, at MIPIM
To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews
