The co-working trend is experiencing difficulties, but flexibility in the office sector will be a permanent fixture, experts told The Real Estate Day.
‘Flexible space is a growing part of the market and it is here to stay,’ said William Matthews, Partner, Global Capital Markets Research, Knight Frank. ‘Corporates are prepared to pay a bit more for flexible space in order to attract talent. It makes sense at this point of the cycle, with record low unemployment in the UK and throughout Europe’.
Investors who want to future-proof their buildings must incorporate two elements: technology and flexibility. Five years ago there was more technology in an i-Phone than in the average office building, but that has changed. Some years ago some predicted people would choose to work from home and offices would suffer. That has changed too.
‘Users now want flexibility,’ said Boudewijn Ruitenburg, COO, EDGE Technologies. ‘The capital markets want stability, investors and banks want cashflow and we try to find common ground and bring life into the buildings’.
It can be a win/win situation, said John Mulqueen, Head of Offices EMEA, CBRE Global Investors: ‘Tenants are willing to pay a higher rent for the core space because they know the extra space is there if they need it. It’s a real synergy’.
Occupiers no longer take extra space to prepare for future growth, but rent what they need in the knowledge they can expand when they need to.
The demand for flexibility refers to space but it also extends to leases.
‘We are offering more flexibility of leases, especially in the larger buildings, otherwise there is value left on the table,’ said Mulqueen. ‘You want tenants to stay because they want to, not because they are tied to a long lease’.
No one has a crystal ball but the most successful investors will be those who can anticipate market trends and spot the next big thing before everyone else.
‘The crucial question is what kind of businesses will exist in ten years’ time,’ said Andrew Westbrook, Partner, RSM. ‘Expectations have changed so much. After all, the big occupiers of today, like Amazon or Microsoft, didn’t really exist ten years ago’.
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