Today's Flexible Spaces Aren't Cutting It For Tenants, But That Is The Opportunity For Landlords
The growth in demand for flexible space is set to snowball post-pandemic, but landlords aren't currently offering what tenants are looking for. In fact, only 13% of occupiers feel that landlords are strongly positioned to meet their flexible requirements.
This is the conclusion of research carried out by Verdantix on behalf of essensys, which provides software technology aimed at elevating the flexible workspace experience. There is a real disparity between what occupiers want from flexible space and what landlords are providing. While the research highlighted that location and layout need some work, the area of most concern is technology.
In total, the researchers spoke to 36 global landlords that collectively have more than 2.5B SF of office space within their portfolios, as well as corporate occupiers such as American Express and Unilever. While tenants were clear in their disappointment in current flexible offerings, they were equally clear that they intend to include flexible real estate in their space strategy moving forward. More than two-thirds of tenants said that flexible spaces will play a role in their strategy, regardless of whether they shrink, grow or maintain their office portfolio.
According to Verdantix Smart Buildings Practice senior analyst Ibrahim Yate, who carried out the research, while many landlords have already acknowledged this movement in the market, most are still in the exploratory phase.
“Because of the pandemic, landlords are eager to search for ways to make revenue more resistant,” Yate said. “Providing flexible space has become a way to keep tenants, switching them to a flexible contract rather than a traditional lease. From my research, I have got the impression that as with other evolving markets, there are a select set of players that do flexible space, but most landlords have a basic understanding of what it is. There’s a lot to learn.”
A Different Approach To Technology
An area that landlords clearly need to learn more about, according to the research, is technology. Almost half of occupier respondents said that access to higher-quality technology is a key driver of flexible space offerings. Essensys Chief Product and Technology Officer James Shannon said that better adoption of technology from landlords is crucial to providing the spaces that employees are seeking post-pandemic.
“The push from employees has come post-lockdown with hybrid working patterns,” Shannon said. “For a business to retain and recruit talent, organizations have to offer some level of flexibility. The follow-on from this is, how do they do that? How can they establish a flexible working policy that gives people choice over where they are and when while making sure they don’t all turn up in the same place on the same day? Employees need a workspace provider that offers the digital infrastructure that allows them to deliver a coherent experience.”
According to Shannon, there are several key elements of digital infrastructure that landlords need. There is connectivity — not just standard connectivity, but enterprise-grade connectivity that is fast and reliable. Then there is security: individual logins for WiFi, private networks for each company in a building, digital security and physical security such as digital access.
Yate highlighted that digital security is a technology concern of large enterprises in particular. According to the research, 67% of occupiers said they are not fully satisfied with the data security provided in flexible spaces.
“I interviewed the head of real estate at a European bank who said he loved flexible space but it would be difficult to convince him that there wouldn't be technical problems since the company wouldn’t have control of the infrastructure,” Yate said. “Landlords need to do more to address concerns about the lack of control.”
In addition to connectivity and security, of equal importance is the platform that allows both the landlord and users to manage the physical space digitally, from handling contracts to booking meeting spaces.
“Technology offers the ability to create a seamless digital experience for customers,” Shannon said. “With the right platform, a landlord can be commercially flexible, armed with the data and control they need to know which product to deploy to suit the requirements in the market, be that a flexible lease or otherwise. A customer can have a thoroughly tech-enabled experience that removes the hassle of managing real estate. Landlords need to fully embrace technology to attract the broadest range of occupiers.”
The Opportunity For Tech-Enabled Landlords
To address all the aspects of digital infrastructure that today’s tenants require of flexible space, a myriad of software and technology is required. The mistake landlords could make is to appoint a different supplier or platform for each of these aspects, Shannon said.
“The temptation for landlords is to find several point-specific solutions and have 10 vendors with different logins and platforms,” he said. “This works up to a point if one business is going to occupy the space for 10 or 20 years, but now we’re in a flexible world. The bar has been raised for what users and enterprises expect. Landlords want and need to be able to make space ready to occupy within days, not weeks or months.”
There is also an argument that many of the technologies required to operate flexible space are intrinsically linked. Remote access and meeting room booking systems are clearly connected to security and connectivity, for example. Shannon argued that a holistic approach can be taken that improves efficiency, increases safety and reduces complexity.
The research suggests that investment in technology is worth it. Seventy percent of occupiers said they would pay a premium of 15% to 25% for flexible real estate that meets their expectations, evidence of its importance to tenants’ space strategies. And as only 53% of landlords surveyed are currently offering premium flexible space, this could be a sizable opportunity for those that take the leap into creating a fully digitally enabled world for tenants.
This article was produced in collaboration between essensys and Studio B. Bisnow news staff was not involved in the production of this content.
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