Corporate Occupiers
According to Knight Frank’s (Y)our Space survey, only 23% of those surveyed expected their total floorspace to decrease over the next three years. 55% expected an increase over the same period, which clearly signals that the office is a key factor for the majority of organisations looking forward. Short-term leases, break clauses and contracted out leases will remain the market norm for 2024.
That said, the occupancy numbers in the office are generally still low across the board, with Mondays and Fridays being particularly quiet in the office. Businesses are increasingly looking to find inventive ways to encourage a steadier attendance in the office spread over the whole week.
The S in ESG
As CBRE point out in their European Office Occupier Sentiment Survey, an occupier’s property strategy sits within an increasingly people-centric strategy framework. Corporate occupiers are starting to recognise that the social benefits of the office can help to encourage people to attend more regularly. Consequently, businesses’ attention is shifting from the ‘E’ to the ‘S’ of ESG.
Many organisations are still reluctant to mandate the number of days in the office. Improving the office environment to support collaborative working and enhance the social capital of the office is becoming a key feature of any property strategy.
Knight Frank’s survey asked businesses which services and amenities they believe their employees will want from their office over the next three years. The top three responses were food and beverage offerings, facilities supporting mental well-being, and gym facilities - all social aspects of office life.
Increasing call for collaboration
The impact of the new legislation around scope 3 emissions is yet to really be understood. However, there is already an increasing call for greater collaboration between landlords and tenants in connection with how they work together in the future.
This collaboration isn’t limited to working together to reduce their carbon emissions. Flexibility is becoming a key feature for occupiers going forward. As Savills point out in the Spotlight: Landlord Flex Survey in November 2023, 67% of landlords expect tenants to require more flexible lease terms going forward.
With a lack of available grade A office space, landlords and tenants are increasingly working together to improve the quality of the office space. Where possible, they hope to upgrade M&E, with the aim of reducing operating costs going forward.
The sharing of capital expenditure to benefit both parties is, and will continue to become, increasingly common.
Will Scott
Partner, Real Estate +44 (0)738 538 5919
will.scott@irwinmitchell.com
Sarah Swann
Senior Associate, Real Estate +44 (0)779 597 1343
sarah.swann@irwinmitchell.com