Page 44 - Spaces Magazine Volume 1

· 44 · Vol 0ne ® In contrast, the average office lease length dropped by 34% from 52, to just 34 months across the same timeframe. This suggests that occupiers are keen to reassess the benefits & amenities gained from the premises. With growing competition in the market, building owners are facing increasing pressure to provide the flexibility of shorter leases, whilst also providing services that will keep tenants coming back. That’s why we’re seeing traditional landlords increasingly entering the flexible office market. Examples of this are many; Grosvenor has commit 300,000 ft2 more to its flex offer, and GPE Plc plans to expand theirs to 1M ft2. This trend intensifies competition for dedicated brands like Workspace Group, which differentiate through location and experience. Their partnership with Smart Spaces for the world’s first deployment of HID’s Google Wallet mobile access, at The Light Bulb, showcases their appeal to the mobile- first generation seeking trendy workplace experiences. The trend is clear: occupiers view, and favour, space as a service. This is driving growth towards premier buildings. As with any product, the middle-ground will soon be dead ground as occupiers seek space as a service. In the short term this has skewed growth towards best-in-class buildings, significantly outcompeting the rest of the flock. Throughout 2023, larger occupiers consistently favoured office spaces with superior ESG credentials, with 56% of acquired space located in buildings rated EXCELLENT or OUTSANDING by BREEAM. 14% higher yields for BREEAM certified buidlings YoY. In fact, certified buildings commanded a 14% higher yield than the previous year than their non-certified counterparts. Even within certified buildings, those rated EXCELLENT or OUTSTANDING yielded another 14% higher returns than office space rated VERY GOOD or GOOD. It is the traditional landlord, who already holds these prized assets, that can respond fastest to reposition space for this purpose. It’s more than just sustainability. When considering intelligent buildings, the internal environment is assessed for health & well-being factors, along with building efficiencies. Initially aiming to connect building systems and workplace experience, smart buildings now prioritise tenant-centric environments, fostering active relationships between property managers and occupiers. Landlords who adapt their assets to meet modern workplace needs, prove irresistible to occupiers. At Smart Spaces, we approach this holistically. Our single platform weaves together world-leading process and energy technologies, end- point to cloud connecting products, controls, software and services, across the entire lifecycle. This enables integrated company management at the landlord, occupier, and user level. That’s why our partners are some of the highest rated BREEAM buildings in the world. Smart Spaces Changing landlord tenant dynamics By Matt O’Halloran Smart Spaces It’s been 5 years of seismic shifts in the commercial landlord-tenant relationship. A swathe of factors has put the power firmly on the demand-side of the scale. Landlords have taken a more active posture as asset managers now, with an understanding of community management. This has created a dynamic dialogue between building owners and occupiers. We see this as a net positive for the marketplace, as it puts the power in the hands of customers, and landlords have been responding. The most indicative metric that captures this relationship is the lease. Lease lengths predict market volatility, whilst renewal rates act as the canary down the coal mine for any attentive landlord that wants to take an active posture in the marketplace. This is where good data can differentiate landlords to see who can stay ahead of the curve. Short-term leases have more than tripled their share between Q1 2019 and Q1 2023, now accounting for 48% of all commercial leases.