Two concurrent trends are driving the way in which occupiers are engaging with real estate at present
Firstly, occupiers are showing a preference towards new space, with this representing 45% of take-up in central London Q3 2019. This demand is being driven by a desire to drive productivity, retain and attract talent and to fulfil wellness and sustainability agendas, by housing staff in the best new space. Consequentially, a significant proportion of the available stock across central London is now second hand – 70% at the end of H1 2019.
Secondly, flex space is increasingly being used to fulfil certain needs, with creative and collaborative environments, coupled with the flexible lease terms, producing an attractive package. Not only is this option proving popular with start-ups, but also corporate businesses looking to fulfil different real estate strategies, for example, grow a digital part of the business or buy time until a new HQ is ready.
Within the context, where new space is king and flex offers an attractive option for any and all, landlords are finding it more difficult to fill second hand buildings, where they may be unable to offer an amenity rich environment or to fulfil wellness and sustainability agendas. This is where tenant ready solutions, otherwise referred to as ‘plug in and play’ gains relevance. Landlords are fitting out space ready for occupiers to move straight in, allowing them to offer more than the traditional empty white box to prospective tenants.
This strategy feeds the mentality of instant gratification, where occupiers know what they want and want it now. Occupiers can take up space without the barriers of procurement and management of fit-outs, licence to alters and wayleave agreements. Moreover, for companies requiring particularly stringent policies around data protection or with concerns around the dilution of company culture, the ‘plug in and play’ solution can offer advantages over flex.
Our Tech Advantage
We are finding this option particularly popular with SME occupiers, without experience of fit-out or the vision required to project a design onto an empty space. Our teams have used Floored, CBRE’s interactive real estate marketing and leasing tool, to great success, showing occupiers what the space will look like, an offering bringing us commercial players closer to our resi counterparts in how we are communicating the look and feel of a property.
While this remains a relatively new approach, rooted in central London, we expect this trend to ripple out to the rest of the UK soon.
The Landlord Solution
Landlords can benefit from employing this approach not only by increasing the desirability of their space, but also nurturing the long-term productivity and satisfaction of their occupiers, resulting in longer leases, higher values per square foot and, ultimately, better returns.
Landlords interested in finding out more about how they can engage with tenant ready solutions can contact me at [email protected].