Investors must keep a sharp eye on the growing demand for flexible workspace in order to protect their portfolios and profit in a new world of work. That was the message from a panel of experts at this year’s Expo Real conference, which tackled the trends shaping the occupier market and the ways in which investors can innovate for the future.
JLL’s global Head of Occupier Research, Dr Marie Puybaraud, introduced the new Human Experience research to highlight how occupier demand for engaging, empowering and fulfilling space is impacting real estate investment. Understanding these occupier trends is essential for investors who want to ensure their assets stay relevant, she said.
Locke McKenzie from institutional investor, Deka Immobilien, said, “From an investor point of view, flexibility is obviously less good because we love having long lease terms and stability but one of the ways we try to cover this issue is to lease to WeWork and other providers. They close with us for twenty years and then they offer the tenant the flexibility they want.”
Deka has three leases with We Work in Europe – it helped them to find their first office in Paris – and it’s one of a growing cohort of institutional investors to partner with flexible space providers in an effort to capitalize on the coworking business model.
“The key multi-tenant office space size of between 400-800 sqm is harder and harder to let because these tenants are moving to co-working,” added McKenzie. “It’s something that we as investors need to keep a sharp eye on as it spreads throughout the continent – how is it going to affect our multi-tenant properties? The easiest way is to play ball with them [co-working providers].”
But in the interest of spreading risk in a market that has only a few clear frontrunners, Deka is exploring its own creative office solutions to satisfy tenant demand for short-term office leases, without disrupting its long-term investment goals.
“What we found is that it becomes very difficult to fit out that [flexible] space so now we are looking at a solution where we say ‘ok, this has this many single offices, this many meeting rooms and the rest is open’. We fit it out to suit for 10-15 years and offer the space to tenants on a take it or leave it basis on shorter lease terms.”
Of course, any significant investment into flexible space comes with the inevitable question: how can we monetise and measure this?
The only clear measurement for an investor to date is whether the tenant stays put. There was clear agreement that closer collaboration at design and fit out stage could ensure the tenant gets the space right and therefore renews its lease.
And when it comes to keeping tenants long-term, landlords are being urged to join forces with their occupiers to create engaging, empowering and fulfilling spaces.
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