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The tenant & landlord power shift – why the customer is in the driving seat

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The power shift

The landlord and tenant relationship has changed.

Rising property values, the growth of flexible offices, and political uncertainty have forced landlords to change the way they market their properties to respond to the demands of occupiers. Not too long ago, the tenant was at the landlord’s mercy, but thanks to the rise in serviced office providers, tenants are now in the driving seat, enjoying greater choice, shorter leases and attractive rent options.

The demand for flexibility comes not least because the UK is a nation of SMEs – which represent 99% of all UK businesses and, in London, account for just over half of all private sector jobs. These companies want the freedom of flexibility, especially in a time of uncertainty.

The rise of the serviced office

The big business that serviced office providers presented was emphasised when Blackstone bought a significant share of The Office Group in 2017, and British Land launched Storey – a flexible office sub brand that directly competes with the original co-working giants. Companies such as WeWork and IWG lease long term space from landlords and then sub-let it out to their customers so it is no surprise that landlords have seen the profit in doing this themselves. Theirs is also perhaps a less risky business model should we see a post-Brexit dip in the market as they own the buildings they are marketing and have more control should they need to adapt to the market.

Just this month, Landsec has launched MYO which promises to solely focus on the customer, encouraging individuality and entrepreneurship, whilst offering a choice of inclusive leases. From providing fully fitted out space, to supporting with day to day hurdles like IT problems, MYO’s priority is to ensure their occupiers can focus on what’s most important, their business, while they handle the rest. By providing tenants the reassurance of a big company, with the flexibility of a start-up, MYO is set to disrupt the flexible office marketplace even further. Their first project in Victoria, in collaboration with Soda and ThirdWay Architecture, is set to open in April.

Myo Landsec ThirdWay serviced office

The Cat A+ model

Another disruptive concept to the marketplace is Cat A+ which has been pioneered by our industry and represents an intelligent middle ground between Cat A and Cat B refurbishments. A Cat A+ fit-out is commissioned by a landlord but is almost as comprehensive in design as a tenant’s fit-out instruction. It offers a ‘plug and play’ space with full functionality, including data fibre and cabling, and provides an alternative solution to SMEs that may not have the budget for a high-tech office renovation, and for which a co-working environment may previously have been the only option.

Although Cat A+ requires more up-front investment from the investor, developer or landlord, it allows them to secure tenants sooner and eliminates the need for rent-free periods because the space is ready to go from day one. It is gaining in popularity as many landlords recognise these benefits immediately following a ‘trial’ project and then quickly apply the same approach across their property portfolio.

Cat A+ Elm Yard ThirdWay GPE project

Whilst landlords are responding to these market changes, ultimately, the pressure is on them to continue to innovate in order to to maintain a competitive edge, compete with flexible office providers, and attract and retain tenants. The need for landlords to be flexible, to understand their customer and to communicate with them effectively, is stronger than ever.

The growth of the proptech industry is proof that developers and landlords are seeking to leverage data to better understand how people use their spaces.

We Are Savvy, an app that has been developed for property people, by property people, captures occupier behaviours and allows landlords to predict and react to changes, based on data rather than hearsay. It helps them to improve the tenant experience within their buildings by creating vertical communities based round a provision of services. The landlord facilitates the smarter, more efficient use of space, whilst simultaneously delivering an enhanced customer experience. It’s a win win situation for both the landlord and tenant and an innovation that we expect will be the catalyst in an explosion of further proptech start-ups in the future.

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