Tenants’ expectations in 2021
In 2020, tenants’ requests changed, given the new shift in the way we work. Working from home or the new hybrid approach translated to the need for more flexible contracts, that allowed tenants to opt for smaller spaces or to renegotiate their terms.
At the same time, the digital revolution entered the space and many office spaces have implemented new motion activated devices, contactless access systems and other technologically led processes that limited human interaction. On the leasing side, virtual showcasing is here to stay for good, as it saves time, money and also helps in the prevention of viruses.
Last but not least, many buildings had to rethink their facility management processes in order to be in line with health regulations imposed by local governments and the World Health Organization.
What changes in 2021 and what stays the same?
Tenants will definitely keep emphasizing the need for flexibility, as Ramona Predescu (Iacob), Country Manager at IWG Romania puts it in this interview on Bright Insights. Flexibility in contracts, in their space design and usage, in the products the companies offer become essential for tenants and potential clients.
Oliver Moorhouse, Director Moorland Property Solutions Limited, also emphasizes the role of flexibility:
”Tenants are also increasingly looking for more flexibility in their leases, as they are more aware of sudden, unforeseen events, which may fundamentally change their business and their office requirements.”
Offices continue to play an important role, the hybrid style of work seeming to be the preferred option (working solely from home tends to have a negative health impact). But with many employees looking for a mix between remote and office work, tenants have no option but ask their landlords for more flexibility in the way they and their employees get to use the space.
And they will use the space differently. Mihai Paduroiu, CEO Office Division – One United Properties, predicts a new approach to development, focused on adapted office building concepts and on collaboration.
”On the occupier side, we see now organisations redrafting HR policies, and reshaping the workplace into an environment that fosters collaboration rather than presence, and innovation rather than repetitive processes which are now becoming obsolete as automation sets in.” – Mihai Paduroiu, One United Properties.
Physical distancing requirements continue to dictate the space design office all buildings must implement.
”We have found that enquiries for space were understandably well down in 2020 but the smaller quantity of enquiries were more focused and looking for quicker occupation. Their requirements definitely focused on giving employees more space per person and creating a more relaxed ‘cafe style’ environment. The focus almost being to tempt staff back into the office from home. This manifested in more break out areas and generally more open plan environments, less densely populated back to back areas of desks.
There may be more focus on creating HQ type spaces, more set up for meetings with clients, board members, staff etc. as the more day to day desk work is done from home with some element of hot desking in the office.” adds Oliver Moorhouse, Moorland Property Solutions Limited.
”In 2020 we leased over 6200 sqm office spaces, as a result of previous negotiations. Companies focus on generous spaces that can be easily configured in order to follow distancing measures. Landlords’ attitude and flexibility matter now much more then before the pandemic” says Mark Oancea, Managing Partner at Vox Technology Park.
The digitization of the industry continues, tenants expecting their landlords to keep up or even be ahead of the game. The latest State of Tex in 2021, by HqO, brings an interesting concept forward: the omnichannel office. Basically, this translates into providing “seamless transitions between digital and physical spaces”, which “can include everything from plugging into your building’s various technology systems to ensure that the building occupant journey is tech-enabled, to increasing your digital programming through virtual amenities that all can partake in, no matter where they choose to work.”
IoT will gain a lot of popularity, as tenants require more and more touchless experiences, in all their interactions with a landlord.
But being tech-focused can also mean attracting more premium clients. A Cushman & Wakefield study mentions that before the pandemic, highly amenitized buildings had an 18.3% rent premium. This percentage is bound to grow, so digitizing buildings and processes can also be a great advantage in one’s portfolio.
This “Flight-to-Quality” trend (the importance given to high-end amenities) is also seen as being on an accelerated growing path by CBRE: “Occupiers are increasingly demanding flexible space options, shared meeting space, indoor air quality, connected building apps and touchless technology when considering new leases. Buildings that provide these desired amenities may find more favor by enterprise tenants as leasing volume resumes.”
Also, as many landlords have already observed, a growing trend in 2021 is virtual showcasing. Tenants would rather see spaces in high-quality 3D, interact virtually with the landlord or the broker, find the best-suited office and fit-out for their teams and even rent the spaces digitally. Why physically visit 15-20 spaces before making a decision when you can see them all online, in 2D or 3D, through guided VR or AR tours?
On the other hand, by going with this approach, landlords save more time, increase their number of leads, eliminate a lot of manual work and fasten their leasing processes.
Even though we now have vaccines, tenants still expect coherent prevention strategies from their landlords. Safety & Security have been a long-term requirement from tenants, but recent events have only emphasized the need for buildings to be in line with regulations and even certified as safe spaces to work from.
“It is important to mention the fact that the entire corporate real estate agenda has been debunked due to the sanitary crisis. Initially, all plans were put on hold, but gradually organizations understood that they needed to secure future workplaces that gather the people together to create and perform. Now, more than ever, the quality of the workplace prevails.
This should include LEED and WELL certifications, the latest HVAC technologies and minimum clear height of 3m +. Commercial terms are secondary, companies now care for the wellbeing of their talent, and wish to access a network of facilities for them when leasing an office space, including coworking options, multiple locations , retail and residential components.” – Mihai Paduroiu, One United Properties.
“2021 will be more optimistic, but returning to normality still takes time. We estimate that the work from home trend will still continue, although most tenants have adopted a hybrid style of work. Regarding safety measures, these requests come by-default and in order to ensure our tenants’ safety even more, we opened a vaccination center in our building.
Our tenants appreciated that we had installed thermal scanners at entry points, the reorganised traffic routes and cleaning measures in shared spaces. At the same time, we’ve created a dedicated relaxing area, to make coming back to office as easy and relaxing as possible.” – Mark Oancea, Vox Technology Park
Technology can also contribute to meeting these needs. This comprehensive article by CBInsights summarizes multiple technologies that can be implemented, in various areas of a building, in order to keep people safe: starting from pre-entry wellness checks in lobbies and at buildings’ entrances to toucheless elevator access, social distancing sensors between desks to low-touch devices in kitchens and bathrooms to tools and apps that go beyond health purpose and also ensure a good communication and cybersecurity.
“2020 was full of challenges, but we are proud to have been able to be proactive and also react in a timely manner. Thus, we’ve introduced anti-Covid safety measures since the beginning of the pandemic and we met our tenants’ needs with Vox Assistance, an assistance service available throughout the pandemic. ” adds Mark Oancea, Vox Technology Park.
Existing tenants might reconsider their leasing terms and new tenants might want to negotiate in a very different matter than before the pandemic. Many clients look for flexibility, as we’ve seen, and for the possibility to use the spaces they rent accordingly to new working trends. For landlords, this can mean leasing smaller spaces, to smaller tenants, offering discounts or more short-term contracts, in order to ensure business continuity. What’s sure is the office space isn’t dead.
“I think as inoculations sweep across the Globe and we return to some kind of normality, we will see a surge in requirements for office space. During the pandemic, whilst the business community worked from home, leases continued to wind down and there will be a surge of businesses who require different office space for many reasons. With less time until the end of their leases and in some cases where they are holding over existing leases, they will have more flexibility to relocate their office without the burden of a long lease to try and surrender or sublet. Generally, there will be a strong demand for office space as the restrictive nature of the pandemic subsides, it will be the style of fit out that will evolve, as it was anyway, it’s just the pandemic has accelerated the office evolution.” says Oliver Moorhouse, Moorland Property Solutions Limited.
Mark Oancea, from Vox Technology Park, adds:
“There have been some requests on leasing conditions, but we solved them by extending contractual periods for temporary rent discounts. Even with the WFH trend, most companies stayed open to bringing employees back to office, knowing that safety measures are in place in order to protect them. For us, creating a safe working environment was a priority.
Companies’ strategies will definitely change and with them, leasing contracts will become more flexible.”
Flexibility and technology seem to be the buzzwords in commercial real estate in 2021. With tenants trying to stabilize their businesses, landlords must show an openness to communication, collaboration, and negotiation. At the same time, implementing the best health and safety measures and transforming the modus operandi through technology are expected from tenants and even more strongly required from their landlords.
In terms of working style trends for 2021, a hybrid model gains popularity. People will want to work both from home/remotely, but they have easily started to come back to the office, for all the benefits such a space offers. This means that tenants will still rent, but even this will change – virtual showcasing becomes a powerful tool, helping both clients and landlords to run these processes remotely and safely.