New research has flagged a wake-up call for landlords: almost half of office occupiers want to relocate in the next three years. On top of that, 95% of office occupiers with more than 1,000 employees have the flexibility to do so.

These are the headline findings of the survey carried out by international law firm Gowling WLG in collaboration with the BPF. The research was carried out during February and March 2021 to gain an insight into how office occupiers are reacting to a year of national lockdowns and enforced home working.

While the survey predicts a swathe of change in the office sector in the next few years, Gowling WLG Real Estate partners Felicity Lindsay and Dan Gwilliam said that this can all be viewed as an opportunity as much as a looming challenge. In their experience, many landlords are already alive to the number of lease events coming up over the next few years and are acting now.

“If they weren't in active dialogue with occupiers prior to the lockdowns, then they certainly are now, as part of customer engagement programmes,” Lindsay said. “Long gone are the days where occupiers take a passive approach to their space. Some occupiers have gone as far as appointing in-house real estate specialists, whose role will be ensuring that premises meet the changing needs of their employees.”

A Need For Flexibility

Continuing in this positive vein, the research suggested pronouncements of the death of the office that were heard when the global pandemic first arrived were misplaced. Only 3% of respondents to the survey said they were moving to full-time remote working. In contrast, 82% of respondents agreed that an office is a vital tool to facilitate collaboration and maximise employees' performance.

However, that’s not to say working from home is a phase that has passed. More likely, businesses will move to a hybrid way of working, with time spent in the office mixed with remote working to some extent.

As a result, flexibility has become far more appealing. Eighty-four percent of respondents indicated they were considering a move to flexible space such as serviced offices or are already using them. The advice from Gowling WLG is for landlords to absorb this desire for flexibility.

“Providing a range of leasing options to include Cat A, Cat A+ and fully fitted plug-and-play space, together with optionality around the length of the term of the lease or occupational arrangement, will be particularly appealing,” Gwilliam said. “The pandemic has accelerated the need for flexible leasing and many businesses will be considering moving from traditional leases.”

This move to flexibility will inevitably have an impact on the space a business requires overall. A third of occupiers who responded to the survey said they were looking to downsize office space due to more frequent remote working. However, just more than a third (36%) said they were looking for more space to allow employees to socially distance. Many indicated they were still learning about the space they would need; 72% are using smart technology to monitor and optimise how the office is used.

“Conversations are certainly happening between property owners and occupiers and owners are keen to provide spaces that people want to work and spend time in,” BPF Director of Policy (Finance) Ion Fletcher said. “However, many businesses are still figuring out what a more hybrid work style means for their space requirements. These will be unique to each business and we’re unlikely to see a ‘one-size-fits-all’ model coming out of these conversations.”

The Offices Already Exist

Another call from early in the coronavirus pandemic that offices in city centres — London in particular — will be less in demand has also been debunked by Gowling’s survey. London remained the most popular location for office occupiers, with 37% of respondents considering a move to the capital. Similar demand in cities such as Birmingham and Manchester suggested that the trend for economic activity to cluster in key cities will continue.

Gwilliam believed that the offices that occupiers are looking for in these locations, including serviced and flexible office, already exist.

“The last few months have seen various announcements of new office developments across the country and also of occupiers announcing plans to move to pre-existing premises,” Gwilliam said. “This is a good indication that the right space for many occupiers is available or can at least be supplied with minimal adaptation. For corporate and large businesses particularly, there will be a need to reconfigure some space to suit the new agile policies that many will be implementing.”

If the space does exist, a key consideration for a landlord is the paperwork. A landlord needs to be prepared for a tenant to start negotiating a move to a more flexible lease when a lease event occurs, or for a new tenant to be aiming for more flexibility.

“From a landlord's point of view, creating the right model to allow more flexible leasing is key to ensuring that the value of their assets is maintained and enhanced,” Lindsay said. “Landlords, particularly, will also be following with great interest the government’s review of commercial landlord and tenant legislation, due to be launched before the end of 2021, and how it might reshape current market dynamics.”

While there are clearly still uncertainties in the market, the research from Gowling WLG highlights a more favourable landscape for landlords who can stay more open-minded than the early pandemic panic suggested.

This article was produced in collaboration between Gowling WLG and Studio B. Bisnow news staff was not involved in the production of this content. Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.