The landlord and tenant relationship will still be conditioned by the business cycle but, as real estate increasingly becomes a corporate strategic asset, then overall power will shift towards the occupier.
According to Offices 2020 research, 80% of real estate leaders believe occupiers will become more powerful over the next decade.
The power pendulum swings firmly to the occupier
Sombre economic conditions will persist. Underlying this are various structural shifts that are occurring. Occupiers of real estate are more sophisticated, better informed, more strategic and operating at a higher level in their organisations. With that comes a greater demand from the business to use real estate as a means of business transformation.
From the supply side, the market is presently starved of quality product, speculative development finance remains absent and as a consequence new space solutions delivered by the market will remain severely constrained.
These conditions will intensify out to 2020.
What does mean for office occupiers?
For those seeking business transformation and enhanced productivity through portfolio re-engineering the timing is perfect. To bring product to the market, developers will need to become more cognizant of occupier needs. You have the opportunity to influence the development agenda – namely the specification of the product and the time-scale over which it is released – leading to a more favourable cost-benefit equation.
For those unable or unwilling to drive transformation, the market will continue to be opportune. Nervous landlords are faced with income risks, increasing asset obsolescence and with the inevitability of more stringent environmental legislation. This will necessitate stronger partnerships with occupiers enabling more favourable lease extensions, re-gears and in-situ refurbishment to drive workplace change and enhance in-use sustainability credentials.
The pendulum of power has swung firmly towards the occupier and will not swing back in the foreseeable future. To understand the opportunity this presents, please contact us to arrange an Offices 2020 presentation or visit the website …
Put a handful of landlords in a room together with some occupiers and watch what happens. The outcome is likely to be a surprising amount of
cordiality and good will.
Posted by: Alexander Colpaert
EMEA Office Research
Jones Lang LaSalle EMEA