The flight to quality and ease: How occupier demands are changing
90% of the global businesses we interviewed as part of our recently launched (Y)OUR SPACE report believe real estate is a strategic device. Leaders recognise that it matters and supports them in all kinds of areas such as branding, talent retention, cost control collaboration and wellbeing.
4 minutes to read
Lee Elliott, Head of Global Occupier Research, speaks to Amanda Lim Head of our Flexible Office Solutions team, and James Fairweather, a partner in our Tenant Representation team, to understand how that’s playing out on the ground.
Lee: How is that strategic intent playing out in the requirements that are coming to you from clients?
James Fairweather: We've seen a real flight to quality from our clients – they’re wanting to get the best in class new space. In 2008-2012, we saw an average of between 8% and 12% of tenants wanting new space, and taking new space. In 2019, 21% took new space. In 2020, we actually saw 28% taking new space, so there’s been a real flight to quality.
We've also seen tenants wanting fitted-out space – space that they can move into. Last year, 60% of our enquiries and acquisitions were for fitted-out space. We acted for Bank Leumi in acquiring space in the City. The reason they took the space was cost-saving, a de-risk with Covid, and also a time management saving. They didn't have to deal with all the fit-out.
We also saw that there was a move towards WELL buildings. In the last 6 months, I've acquired five spaces, all with roof terraces. Clients are really moving to that. We're seeing people wanting proper, clean air conditioning and open windows. And of course, amenities. It's really good to not just have the bicycle racks and the showers downstairs, but also gyms and terraces for events – such as yoga classes.
Lee: I think that's really interesting. I used the expression before of 'talent magnets', places that pull people in and give them the amenity to really support their wellbeing, but also their productivity. Amanda, the flex market's been a real story in the London market over the last 5 years or so. Are you seeing that same strategic intent playing through in the requirements coming across your desk?
Amanda Lim: Yes, absolutely. As clients are putting innovation, collaboration, and staff development at the forefront of their real estate strategy, flexible office space can now be used as a supporting pillar for companies who are planning their real estate strategy across the next 5 years, as a temporary solution or long-term solution, whichever works best for them, to include all the amenity space that James was talking about, but not have to manage the space.
Lee: How's the talent agenda for businesses really going to influence the real estate decision making processes of occupiers over the next couple of years?
James Fairweather: Well, on the conventional side, clients are definitely looking at public transport and how they get their staff into work. They're concerned about that. They don't want to go on tube lines and things like that, so that's very important. The other thing they're thinking about is safety. Just making sure that the building is safe for them in terms of making sure that everything is clean – and touchless technology comes into that too. But equally, businesses are acknowledging that they need to get people back in and collaborate.
When it comes to the cost of talent versus the cost of real estate, how do occupiers support the best talent with the best buildings, but also respect the financial pressures that they may be under?
James Fairweather: Yes, they really want to retain that talent, but also attract it. That's the important thing. In terms of cost, we are benefiting at the moment from slightly reduced rents. What we saw after the GFC was finance directors with their spreadsheets trying to reduce the costs a lot. It's changed. The FD is still there, but they're looking at cost, and understanding that cost can be good. It can transform a business.
I think this is all about the transition from seeing real estate as a cost, and rather seeing it as an investment.
Amanda Lim: I think it's important to remember there isn't a one size fits all solution at the moment. As I said before, a lot of companies are still trying to figure out what works for them, what's style of working will fit them and their employees moving forwards. Flexible office space gives them that flexibility.
It also gives businesses that community feel, and I think 'community' was such a big word used in the flexible office space boom over the last few years; your water cooler chats and the people you meet. We have to remember you cannot build a business culture, or initiate new relationships over Zoom. You can, but it's completely different to what you can do in person, the referrals you can make across businesses and across start-ups.
For more information please contact the flexible office solutions and tenant representation teams for more information.