Is Working From Home Bad News for Property Owners and Landlords?
The past year has been the single biggest human experiment in Working From Home (WFM), to say the least. At the same time, workplaces are going through the biggest usage-related disruption in history of offices. Real professionals are eagerly looking into the future at the moment. Will people prefer staying at home? Will office become more of an option rather than a necessity? How will landlords and property owners rise to the challenge in providing enough flexibility to their tenants?
When recovering from the pandemic, employers will have to look for ways to balance WFM and optimizing the office resources. There might be possibilities to cut property costs by reducing space or maybe, with the social distancing and safety measures, we will end up with the same amount of office space in the short term. In the long run, the vacancy rates are most likely going to increase. One thing, which has proven to be evident, is that employees appreciate the possibility to avoid commuting and will want to work remotely some days of the week.
Changing occupier needs mean a new kind of market demand. The phrase “Location, location, location” may not be relevant any more. Being able to host an HQ in a central location has traditionally been a competitive advantage for companies in acquiring the best talent. In the post-Covid world, few companies and CFOs can afford to keep the traditional office under-utilised if people keep working from home, or at third-party offices spaces, 2-3 days a week. Most people are missing physical interaction and work community but at the same time are not willing to commute 5 days a week in traffic jams - especially in large metropolitan areas. Modern building owners need to react to this global disruption. No matter how bad it feels to the real estate industry the general offering requires quick updating.
We believe that the future office supply should also be more hybrid and dynamic. The solution is to offer employees a freedom of choice between the home, the office and multiple flexible spaces. In other words, dynamic workplaces that are accessible, have a short commute, and serve both team-working and and individual concentration.
This presents challenges but also remarkable opportunities for property owners and landlords. Selling workspace instead of office space is the key – offering traditional long-term security as a traditional lease, but spicing it up with some flexible on-demand services. The changing needs provide an opportunity to reinvent the commercial deals and create better ways of working for the tenants. In our business we’ve come to see that majority of property owners already have shared resources across their portfolios – and with relatively low utilization rates. Pooling these together and offering them to tenants as a part of the solution presents a major opportunity to increase those rates, improve tenant retention through flexible spillover capacity and to offer a wider geographical range of spaces. Flexible offerings will be a part of the solution in the future – property owners should not miss this train. Partnering with a platform operator is not a bad idea, since more is more when it comes to the numbers of flexible options available geographically. Especially, if it helps the owner to secure the traditional business and helps with tenant retention and experience.
Flexible workspace valuation has been a topic of long-term interest for both owners and investors and COVID-19 has undoubtedly enhanced the need for a consistent approach to valuation. What makes it more complex is the lack of data and evidence and the uncertainty involved. What is certain is that if the operational model is light and cost-efficient enough, that space must be more valuable to the property owner than having a vacant possession.
Spacent has been helping property owners to deploy workspace platform of shared spaces as a service to their tenants within a property portfolio and selling vacant office space flexibly for growing number of Spacent users. Easy operation, no additional leasing administration or long commitments, and additional cashflow for vacant offices. Spacent’s algorithm enabled dynamic workplace simulations help property owners to communicate with tenant needs on a portfolio level.