“Creating future professional services / digital workspaces” – the landlord / occupier divide

When chairing a recent roundtable discussing the topic of optimising property potential, the divide between a landlord’s delivery of a Cat A fit-out and an occupier’s requirements became increasingly apparent. Attended by property professionals, landlords and end user clients, the seminar discussed the balancing act between landlords wanting to keep costs low and making their properties attractive to a wide market, and occupiers increasingly requiring less space and a reduction in the money they spend on their corporate real estate and facilities. 

Looking toward Worktech in London this week, where I’ll be chairing a session on ‘creating future professional services / digital workspaces’, it will be interesting to hear the corporate occupier perspective on this topic from the likes of Andrew O’Donnell, EY’s Head of Real Estate, Martin Laws, Partner for Deloitte, and Beverley Hampshire, Head of Barclays Workplace for Barclays Corporate Real Estate Solutions. Ahead of the panel discussion, I share some of my thoughts below:

Challenging the BCO guidelines

When constructing Cat A spaces for corporate occupiers, landlords and developers need to build spaces which are not only suitable for their client’s needs today, but also meet their future requirements. In today’s market, the corporate need for large spaces is beginning to dwindle and occupiers are encouraging their employees to come in to the office less. Wanting to reduce real estate costs, they’re also wanting to optimise the space they occupy. 

In order to provide flexible workplace environments and facilitate agile spaces, BCO guidelines need to be challenged. The long regarded mantra of one person per 10sqm is now regarded too generous. In densely occupied spaces, planning ratios can be as aggressive as one in 5sqm. This seems feasible enough, however, it’s a costly way for landlords to fit-out their buildings and puts an enormous pressure on a building’s infrastructure, including M&E services. Therefore, they need to be confident that this planning ratio will be adopted by the SME market.

The landlord perspective

SME businesses make up the majority of the commercial occupier market, employing 80% of white collar workers. Universally, there are very few large corporate occupiers who are willing to take the expensive risk of moving to a new way of working that they haven’t tried before. Landlords, who are wanting to make their properties attractive to a wide audience, are therefore understandably cautious about changing the way they carry out a Cat A fit-out. 

The current belief is that to design buildings to accommodate agile working will not only make them attractive to a smaller market, but will also not yield the substantial return it would cost to make these changes in the first place. So, why would landlords change their working model which is less attractive to SMEs and also puts huge pressure on the building infrastructure?

Corporate occupier’s changing expectations

What we’re beginning to see is a shift in what corporate occupiers are expecting from their landlords as standard – and it’s not just one universal way of thinking. Corporate occupiers are realising the growing responsibility to support employee wellbeing, and therefore, see facilities such as tea points, restaurants and gyms as functions that should form part of the building fabric. It is for this reason that occupiers are expecting these functions to come as standard with their let space.

Whilst some occupiers are looking for buildings which come with shared facilities, others are looking for a minimum standard of comms infrastructure when selecting a Cat A space. Recognising the need to optimise space and reduce real estate costs, occupiers are seeing the benefit of facilitating a more transient and agile workplace, and therefore require technologically-enabled Cat A spaces, which will accommodate a 1:6 planning ratio, as opposed to 1:10.

The chicken and the egg 

We therefore find ourselves in a chicken and the egg situation of what comes first – a brave landlord to take the confident step and fit out their space for an agile workforce, or the SME market to take a leap of faith and commit to a new way of working. 

Either which way, the future workplace will be guided by people and technological advancements. In the current property market, whereby occupiers are becoming increasingly reluctant to commit to long term lease options, creating workplaces which enhance employee wellbeing, support a global workforce and retain talent will become the key to bridging the thinking gap between occupiers and landlords.  

The panel discussion will be taking place at Worktech on Wednesday 9th December. Click here for further details.

*What is a Cat A fit-out?

Undertaking a Cat A fit-out is usually carried out for a landlord, institutional investor or end client.  The main objective for this type of fit-out is to prepare a building ready for market or combine as part of upcoming Cat B tenant works.  In order to achieve this, The Cat A fit-out needs to bring a building and its services up to date in line with modern standards. Both the interior and exterior of a building would usually be assessed and updated as part of a Cat A fit-out.