‘A changing landscape for the office sector’
The office sector will have to adapt and change in order to thrive, experts agreed at Real Asset Media’s The Future of Office Investment Briefing, which took place online recently.
‘There’s been a structural shift in the way office space has been used and it has now become a consumer product,’ said Jonny Rosenblatt, co-CEO, Spacemade. ‘This is the Netflix moment. The landscape is changing fast, and those who don’t embrace change will end up like Blockbuster’.
Flexibility is key to attracting and retaining tenants in this environment. As in other sectors, Covid-19 has has accelerated existing trends, rather than drastically changing the picture.
‘The pandemic has accelerated the demand for flexible space across markets,’ Rosenblatt said. ‘Tenants want an array of different products and landlords want to deliver them but they don’t know how to. We’re at this precipice now’.
The different models have co-existed so far: the traditional leasing market with quarterly rent collection and 5 to 15-year leases on the one hand, and the flexible co-working space on the other.
‘Landlords used to let the space to a co-working operator who played the rent arbitrage game, but then we saw a landgrab by operators like WeWork who took up leases at the top of the market’, Rosenblatt said. ‘Many new companies and start-ups have grown up in the flexible space and don’t know or want anything else’.
Developers, landlords and operators must find new and innovative ways of providing that flexible office space.
‘I don’t know what will happen but I do know that everything will change,’ said Cees van der Spek, Public Affairs & Global Corporate Relations Director, EDGE Technologies. ‘There will definitely have to be more flexible space but delivered in a different way to what is being done today. We’re in the middle of a profound re-thinking of the office model’.
Flexibility is no longer a nice-to-have but an absolute must-have in the office sector. ‘Flexibility is key,’ said Jarek Morawski, Director, Research and Analysis, Grosvenor Europe. ‘Large floor plates give you more options on how to design work spaces’.
Space is likely to remain a requirement even after the pandemic. People may return to the office in smaller numbers or only for a few days a week, but they will demand safety measures, more space between desks and larger conference rooms.
‘Scale is important because it give us room to move and to adapt to social distancing requirements,’ said Jake Jephcott, Chief Development Officer, Olivia Business Centre. ‘The resilient buildings of the future will have a big floorplate’.
Adaptabiliy goes well beyond size.
‘There has to be flexibility in the hardware, the building itself, but also in the software, the tech components, the internal fit-out’, said Tomás Jurdák, Partner, Head of Real Estate, MiddleCap.
‘It is essential now for a building to be adaptable to changing demands and circumstances and technology is a great help in this,’ said van der Spek. ‘It is not just small companies but big corporates as well that now demand flexible offices as well as flexible contracts’.
Flexibility must be across the board, from the size of the office to the length of the lease.