Research by the Urban Land Institute and The Instant Group showed that almost all office occupiers plan to rethink their property needs — but are waiting for the right moment.

The analysis — Bridging the occupier-landlord gap for the future of workspace — suggested office users are still pondering what activity-based workplaces, flexible working and hybrid working patterns mean. But they are holding back on action until the economic background — including higher interest rates and build costs — becomes clearer.

The report's authors spoke to 285 office occupiers, landlords and third-party advisers in North America, Europe, Asia Pacific, the Middle East and South America.

Their conclusion was that only 14% of occupiers believe their existing workspace portfolios align completely with their business objectives and strategies.

As many as 80% of landlords and 75% of occupiers expect greater lease flexibility and agility over the next five years. The consensus among both was that the answer will involve new lease structures that allow occupiers to expand and contract their office footprint.

"In a sense, the leasing relationship will need to become more of a partnership between the landlord and occupier,” Instant Group CEO of Partnerships Craig Hughes said.

No surprise then that 62% of landlords expect a decrease in capital values with the current valuation model, which only awards long-term contracts.

However, less than 2% of asset owners feel they have the required capex to respond to occupier and ESG legislation-related requirements.

“Our study shows that despite the state of flux that the office market is in, physical workplaces remain key for businesses," ULI Europe CEO Lisette van Doorn said. "However, occupiers have not yet fully worked out how much space they would need and which types of spaces. As a result, they need a flexible approach from landlords partnering with them on this journey.

“Landlords are trying to work out the future in this perfect storm of structural demand changes with demand generally shifting to more flexible and energy-efficient spaces. With tenants critically reviewing their needs and the building attributes at lease expiry, landlords may not have the luxury for the market to improve but might need to act quite soon to preserve rental income."