MORE ASSET MANAGERS AND DEVELOPERS TO CREATE FLEX SPACE AS DEMAND FOR FLEXIBLE LEASES GROWS, SAYS SAVILLS
According to a recent survey* by Savills, 75% of asset managers and developers expect tenants to ask for more flexible lease terms going forward, particularly when it comes to being able to book space on an ‘as-needed basis’. The international real estate advisor notes that this rise in demand for flexibility will open up more opportunities for asset managers and developers wanting to enter the serviced office and co-working sector, with 29% already planning to or would like to operate their own brand (in addition to the 29% of those questioned already have a flexible offer).
This focus on flexibility has also impacted the way asset managers and developers consider the asset management of their real estate portfolio with half of respondents confirming that they would be happy leasing between 10% and 25% of a building totalling 50,000 sq ft or above, to a flexible workspace provider. Moving forward, Savills anticipates that all larger buildings of 100,000 sq ft plus, will have flexible offering as standard.
Charlie Wardroper, head of Savills PIVOT and joint head of Savills Flex, comments: “Covid-19 has accelerated how and where we use offices for the individual and the company. The demand for flexibility regarding lease terms was already gaining traction prior to the pandemic and has inevitably increased as an outcome of it. Our survey results show that asset managers and developers are increasingly recognising this and we have no doubt that a flexible office offering will continue to cement its place within what were traditionally conventional-only office buildings.”
Cal Lee, global head of Workthere (Savills flexible office specialist) and joint head of Savills Flex, adds: “The role of the flexible sector in supporting a hybrid working model will be crucial. It is therefore natural that we will see a growing appetite from asset managers, investors and developers looking to enter the sector in order to create a flexible offering for new and existing tenants. We have already seen some successful examples of this although, due to the scale of resource and expertise required to launch a successful own brand of flex space, we expect most to enter the market via partnership in the form of management agreement in the short term. However, in time, we expect more and more to begin building their own flex brands, learning from their partnerships with the operators.”
Savills research showed that a majority of landlords hold the flexible office sector in high regard with 62% advising that it is either important or nice to have a flex office provider as a tenant in a building, with 67% also remaining the same or more positive towards flexible office providers since the start of the pandemic. This is further supported by the responses regarding the long-term prospects for the sector with 62% more optimistic about the sector moving forwards.