As the amount of available office space across the UK shrinks, letting agents are, almost daily, gleefully announcing that landlords once more have the upper hand. So it is perhaps unsurprising that research commissioned by the British Council for Offices published this summer suggests that office occupiers are being let down by landlords.
A 60-page report (see box) notes that occupiers’ ire is focused particularly on property management, with only one in five office tenants rating their property management service as good or excellent.
Are landlords the bogeyman of the piece, are their managing agents muddying the waters, or are occupiers simply too demanding? Chris Richmond, head of real estate at PricewaterhouseCoopers and chairman of the BCO’s occupier group, does not think it is the latter, and though he is careful not to attribute blame, his disappointment with the situation many occupiers find themselves in is tangible. “The lack of engagement is the key thing for me,” he says. “That is what is leading to massive amounts of frustration.”
What is striking about the respondents quoted in the BCO research is that they are not small firms taking a few hundred square feet in the corner of an old building, but gold-standard global concerns.
“You would think that corporates would be able to leverage better service,” says Richmond. He suggests that part of the solution is for building owners to be more proactive: “If they get out and see their buildings and actually talk to occupiers that would help. I have never been asked ‘how are things for you, what can we do?’ and I have only just had a landlord talk to us about future requirements – the first time that has happened.”
There are signs that things are at least starting to move in the right direction and follow the example of only a handful of major players, who have worked hard at building relationships with occupiers for more than a decade. Change even extends to semantics. “We prefer the term ‘building owner’, rather than landlord,” says Debbie Hobbs, sustainability manager at Legal & General Property. “We have an asset manager for every building we own, so if a tenant has an issue, they should be able to escalate things through them.”
Too often, property managers are perceived by occupiers as unhelpful, if not downright obstructive (see box). Chris Lewis, head of tenant representation at Deloitte Real Estate, says: “Part of the problem is that the key performance indicators that really matter these days are not featured in current management agreements.” These include basic items such as power, connectivity, reliability of lifts, air conditioning and toilets.
Even if occupiers get a level of service they are happy with, when their lease break approaches getting the information they need to decide whether to stay or move elsewhere may not be easy, says Carter Jonas partner Mark McAlister. “It is not a happy time for tenants. Landlords are hanging on in a cat-and-mouse game, leaving it to the last minute, so the tenant normally loses, and that is not healthy.”
Howard Morgan, founder of Real Service and author of the BCO report, believes that the property industry already has the answers to the problems outlined above. “The challenge,” he says, “is making it happen. You would expect someone to come in and disrupt the office market; at present it is firms like We Work taking large amounts of space and running it in a hospitality-like way.”
Improving, but needs to do better
Fewer than one in three occupiers polled for the BCO’s report, Building performance: rethinking the relationship between owners, managers and occupiers, feel that the property industry understands the needs of their business. This was just one of several disappointing findings highlighted by the research. Commissioned by the BCO to build on work undertaken in 2002, this year’s results show that there have nevertheless been improvements in satisfaction levels across the board.
But while occupiers are generally much happier with the quality of their buildings, how those buildings are managed continues to be a source of friction. The report suggests that part of that frustration comes from changing occupier expectations. The fundamental shift over recent years in many businesses from a cost-saving to value-enhancement mindset has not been mirrored in the property occupancy environment.
Other areas, such as corporate social responsibility, the environmental movement and greater emphasis on placemaking, have further raised occupier expectations. Many building owners and property managers have been slow to address these, or even recognise them, resulting in sub-optimal relationships.
The research suggests that occupiers are pragmatic about what may be achieved in the near future. Although service level agreements are common in many businesses, their virtual absence in the property sector means that a sudden introduction is unlikely. Occupiers are optimistic, however, that the introduction of voluntary service commitments could be achieved without too much teeth-gnashing by their building-owning counterparts.
An occupier’s tale: Flushed with frustration
One of the reasons why occupier satisfaction with those running buildings remains low is that many of the issues they encounter are frustratingly simple and, in theory, can be easily solved.
A blue chip corporate with offices across the UK, which does not want to be identified, gives a simple example. “We occupy two floors of a multi-tenanted building and we wanted the WCs cleaned at least four times a day, rather than just once, as was provided for in the building’s regime,” it says.
A direct approach to the landlord was quickly deflected to the property manager, who refused to provide a bespoke cleaning pattern, even though the occupier was willing to pay extra.
“In the end we had to arrange for the additional cleaning ourselves,” complains the occupier.
Proptech could be way forward
One of the greatest areas of dissatisfaction for occupiers highlighted in the BCO report is innovation, flagged up by one in five respondents. Although buildings may be getting marginally smarter, the processes used by landlords and property management firms to manage their properties are essentially those that have been in use for decades.
It is an irony not lost on Rob Riley, co-founder of property software company Tenant Assistance Program. “If I was a chief executive of one of the big firms I would look to introduce technology in low-margin areas, such as property management. Whereas what is happening now is that the focus is on high-margin areas such as valuation and agency,” he says.
Riley and co-founder Howard Bottomley are not optimistic that the situation will change any time soon, even though they point out that the younger generation entering the industry will increasingly be expecting data to be easily accessible and simple processes to be automated.
“The big advantage in our area is that technology could do the day-to-day management that releases the property manager to spend time with their tenants,” says Bottomley.
One flicker of change came almost 12 months ago, with one of the first cohort of businesses admitted to east London-based proptech accelerator Pi Labs offering to use technology to empower tenants. OfficeR&D is a platform designed to allow occupiers to manage their space better. At present it is aimed at those creating co-working space (ie, quasi-landlords). Although the principles of OfficeR&D’s software can also be found in complex facilities management programs, founder Miro Miroslavov says its simplified, cloud-based format makes it much more accessible. He says: “Occupiers can quickly see which parts of the building make most revenue and what effect reconfigurations would have.”
BCO’s 10-point plan to improve the office industry
1. Adopt the BCO’s new definition of “building performance”.
2. Increase engagement on quality and value.
3. Create a building performance scorecard.
4. Define service standards.
5. Encourage more transparency.
6. Rethink the role and basis of remuneration for property management.
7. Make it easier for valuers.
8. Encourage the use of “voluntary service commitments”.
9. Recognise and reward outstanding property management.
10. Promote the property management profession and increase training.
