What’s going on:
A global survey conducted by the Urban Land Institute and The Instant Group has uncovered a significant shift in the office sector: whilst offices remain a fundamental part of our working lives, the sector is undergoing a considerable transformation.
Occupiers are exploring how activity-based workplaces and hybrid working patterns may impact their day-to-day operations, creating a need for landlords to adopt more flexible approaches. Landlords face further pressure from economic challenges such as rising interest rates, high inflation and construction costs.
Why it matters:
The Instant Group’s report indicates that only 14% of occupiers feel their office space is properly aligned with their business objectives and strategies, despite the office’s crucial role in portraying the corporate culture, fostering collaboration and supporting younger and new team members.
The survey revealed that landlords have an even greater expectation for more flexible leases and agile solutions over the next five years compared to occupiers, with 80% of landlords anticipating the need for shorter, more flexible leases and pay-per-use services.
How it’ll impact the future:
62% of landlords anticipate a decrease in capital values due to the outdated valuation model which only acknowledges long-term contracts. In order for office providers to evolve from simply providing space to providing a space-as-a-service approach that is operationally managed, a new approach to real estate valuations must be taken.
