By Antonia Cardone, MCR.W, Managing Director, Workplace Strategy & Change Management
Globally, occupiers and landlords are responding to game changing developments in technology, economics and demographics. You can think of the relationship as a game of chess; going back and forth, each decision tied to the next. Let’s take a look at how it plays out and where tactics can be improved.
First of all, what are the player’s goals for the game? Landlords want occupants that bring value to their rent roll. In terms of occupiers, they recognize the value of their people and attracting and retaining talent as key to achieving business success.
Landlords parry with amenities to differentiate their offering and lure the most valuable occupiers, the biggest, the most credit-worthy, the magnets and influencers who draw the attention of others and in turn help increase the value of their buildings. Occupiers are drawn by an appealing work environment as a positive influencer for their current and future workforce.
It sounds like providing amenities is a winning strategy for both players, but recent research of Cushman & Wakefield finds conflict between what occupiers want and what landlords think occupiers want.
We found that most tenants identified cost as the most important factor, followed by location. Amenity factors, such as natural light and end of trip facilities were rated highly by occupiers along with large floor plates that can accommodate flexible fitouts. Despite this evident preference, landlords believed that customer perception of the building and services were more important.
Landlord Strategies: ‘Welcome to the Concourse Level’
Landlords are making the most of new developments which have the luxury of a clean slate and premium pricing.
- They’re incorporating interesting amenities: expansive roof decks and gardens, open air atria, clubs on elevator transfer floors, secure elevators and lobbies for anchor tenants, parking privileges and accommodations for drivers and cyclists.
- Amenities provide for the types of tenants they seek to attract: collaboration spaces and fitness centers for tech companies, chauffeur lounges and private fine dining experiences for hedge funds.
- Buildings now incorporate sustainable design principles and separate metering to help offset operating costs for each tenant.
All this comes with some of the highest rents ever. Across the world, this trend is strengthening with significant amenities provided in new high rise towers everywhere.
As an occupier, however, it is still possible to benefit from access to these experience-rich environments without paying the premiums to be in a new building.
Globally, landlords are re-positioning older assets with large capital improvement programs, adding amenities to attract tenants and become more competitive. They realize they can fulfill the need for higher quality work environments that tenants are demanding.
By renovating existing buildings and unused spaces such as transfer floors, interior retail spaces and narrow floorplates, landlords can turn their Achilles heel into market leading tenant amenities. To that point, there is a rise of tenant-lounges with artisanal coffee baristas, boutique hotel-style lounge seating, co-working, meeting and collaboration spaces. You say basement, landlords say, “Welcome to the Concourse Level.”
A good example in London is the redevelopment of Battersea Power Station, a decommissioned coal-fired power station, into a multifunctional mixed-use work/ live space.
The Occupier Viewpoint
Occupiers focus on curating the experience of their employees, which includes where they work. Those companies focused on cost are looking for ways to provide a great work environment without having to pay for it entirely themselves.
Previously, just being downtown, proximate to public transit was sufficient, but now that employers are expected to offer so much more, the stakes are rising. Occupiers are interested in food quality and variety; wellness, and access to the outdoors and exercise options; and collaboration created through community spaces where people intersect. They want places where their people will linger and remain connected to the organization and each other in meaningful ways. Instead of creating suburban campuses with in-house facilities, which is cost prohibitive, they can find high quality amenities in existing buildings located downtown.
The motives of occupiers and landlords create a positive tension which has driven an emerging and significant trend in the corporate office market: amenity-laden high-rise towers in the downtown core. What we used to only see in corporate campuses, we are now seeing in large office buildings nestled together in our CBDs. This move to city centers is borne out by recent research of occupiers needs. We’re watching closely as the differing interests of landlords and tenants continue to converge.
What we used to only see in corporate campuses, we are now seeing in large office buildings nestled together in our CBDs. This move to city centers is borne out by recent research of occupiers needs.
We’re watching closely as the differing interests of landlords and tenants continue to converge.
Antonia Cardone, MCR.W, is the Managing Director of the Workplace Strategy & Change Management group for Cushman & Wakfield Strategic Consulting.