A New Approach in Office Space Leasing – Part 1: Tenants
Being a Proptech Startup means that we have to discuss with a lot of relevant people from this industry in order to create a solution that fits with the real needs. As a side benefit, we learn a lot of new, growing trends in Real Estate and Proptech and we think it’s best that we share this info with you.
Office Spaces Leases have a lot to suffer these days from a dramatic fall of demand to a slowdown in construction of new spaces.
Because of this lockdown and also due to some trends that started before the crisis, things are about to change. There will be new layouts, new business challenges and the word ‘digital’ is already on everybody’s lips. We are going to talk about the key players (Tenants, Landlords and Agents) and their approach to leasing in a 3-piece series starting today.
Part 1: Tenants
8 key factors still influencing office space leasing
Even before the pandemic, tenants were looking for several main characteristics of an office space when looking to lease:
- An environment that is healthy, offering a good air quality, daylight and opportunities to train or to relax
- A space that has various near-by opportunities to have lunch or dinner
- Commutability – the space should be easily accessible through public transport
- A good ratio between open space & meeting-rooms / skype booths & leisure spaces
- Safety & Security – the building should respect safety regulations and access should be made on a card basis / through an identification process
- Internet Connectivity– a high quality infrastructure plays a vital role in tenants’ businesses
- Sustainability – SDGs are applicable to real estate as well and many players implement measures to reduce the energy consumption, to recycle and to manage waste better
- Total cost of lease, that involves everything from rent to maintenance, parking, utilities or insurance
These are the basic elements influencing the leasing decision. But what changes has the pandemic brought? And are they here to stay?
What’s new in 2020 and 2021?
New Office Space Layouts
Many tenants will require specific measures to be taken by agents and landlords before leasing. They will look for layouts that favor social distancing, so we might see a rising number of private offices.
And this is available for those tenants that don’t decide to have their employees work from home (i.e. Twitter announced that their employees can work from home forever). The same study mentioned above also stated that “4.9 percent of office workers said they wanted to work exclusively from home going forward, and 60.6 percent of workers planned to split their work time between the office and their homes.”
Having people still working from home might translate not only into new layouts, but also into leasing smaller spaces.
Focus on digitalization
Even if technology in real estate is not something new (in 2019, global VC investment in real estate tech companies was of $31.5B.), it will definitely play the main role in the way we do business.
If up until now, most tenants agreed to visit various locations, go through lengthy pre-sale discussions, receive 2D static presentations in PDF, now things have already changed.
Given the social distancing measures, tenants will no longer agree to visit 10 spaces and go through face-to-face meetings with different representatives before making a decision.
They will need access to digital, integrated platforms that make their experience easier, safer and faster. Digitalization will offer them:
- Access to real-time availability
- Real-time feedback from agents and landlords
- Complete details and tech specifications of a building organized in a completely digital format
2020 brings a totally new context and a new normality. The pandemic has economical consequences that hit many markets, real estate included. A lot of big tenants stopped their expansion – WeWork for example, hasn’t been able to pay rents for some of their locations, according to this article.
The effects of the pandemic are here to stay for the next 1-2 years, so landlords and tenants will find themselves in the situation of finding new approaches. Delayed payments or payments made quarterly, discounts or free rent periods are just some of the new solutions in office space leasing that we might see in 2020 and even 2021.
To sum it up, office space leasing is changing and the effects of the pandemic will influence the way tenants used to do business. The main factors they used to take into account when deciding for a new space are now completed by the digitalization of buildings. Tenants will look for safer ways to rent and 3D renderings are one of the few standing options.
In our next post, we will discuss how this leasing experience will change for landlords.