With falling values and a change in occupier demand in the post pandemic landscape, owners are looking for creative ways to attract and retain tenants and drive value in their office buildings. 

The letting market is starting to see a shift away from the traditional approach, where tenants were willing to commit to medium term leases and finance their own fit outs.  Increasingly tenants are now looking for landlords to deliver best-in-class space with added flexibility on term and size. They are also being more selective on the type of space they are taking and the amenities which landlords/buildings provide. 

There are various reasons for this. 

Employers and their employees: Businesses today need to entice employees back to the office, attract and retain talent whilst fostering a flexible business model. Owners are therefore enhancing their spaces by incorporating features such as gyms, well-being spaces, café’s, cycle facilities, car charging points and prayer rooms. Sustainability is also being prioritised where feasible and impactful. These improvements make the spaces more appealing to occupiers, who, in turn, use them to attract and retain employees - creating a win-win for everyone involved. 

Rightsizing or downsizing (a false dichotomy?): Many occupiers are taking less space when renewing their leases, but flexibility still remains key. Tenants are increasingly seeking options to expand in the same building, either by way of a pre-emption right over other space or through choosing a building where there is likely to be available space in the short/medium term future. To cater for this space flexibility, office buildings with fitted or serviced space are proving attractive to tenants to allow them to flex up (and down) either permanently, as they grow and people return to the office, or for specific projects which require more space for a fixed time period.  

Fit-out costs: The combination of significant building cost increases and rising finance costs have deterred some occupiers from carrying out fit outs on new space. Having fitted spaces on flexible terms (often inclusive of service charge with limited repair liability) ‘ready to go’, removes the concerns that many occupiers fear when taking new space. Owners who have the expertise, funds and reliable contractor contacts may also be willing to carry out tenant fit out works as a means of attracting more lettings.

Tom Gaynor at CEG comments:

“Since launching our flex service Let Ready by CEG in 2018, we have seen rapid growth particularly, post covid in the demand for flexible workspace in buildings that offer rich amenities. Companies are now using the office as a recruitment tool.

A landlord willing to deliver a bespoke workspace in an amenity rich building, especially one that will amortise the costs within the lease, is going to look more attractive to businesses that might not be able to pay for a fit-out up front or do not want to commit to a long lease.

CEG chooses to manage all aspects of our buildings in-house, we provide cafés, gyms and fitness studios, cycle storage, and excellent shower and changing room facilities across most of our buildings. Each building has its own dedicated Life team, supported by an app, designed to make our tenant’s lives easier. Whether its local information, meeting room bookings, fitness classes, events or opportunities to collaborate with others in the building it all delivers productivity and helps build our thriving communities."