EXPO REAL: Generating a workplace revolution?

A revolution of the UK and Irish office market is in the offing as UK unemployment hits its lowest point for 20 years, making the war for talent more acute between employers. Blurred boundaries between home and work continues to have an impact on the way occupiers and their employees use their workspace. But are landlords truly capitalising on the opportunity? “Is the UK and Ireland office market generating a workplace revolution?” said Edward Pittar, partner at Malcolm Hollis, speaking as a member of an expert panel on EG’s UK and Ireland stand at Expo Real. “We used to be users of real estate but we’ve now become consumers.” Investors and landlords need to understand who they are designing and building for, he added. This is leading to “tough demands” for developers, according to John Miu, chief operating officer at ABP London, which is developing a 40-acre mixed-use scheme at Royal Albert Dock in east London. “The first thing occupiers talk about is their employees’ lifestyle, as they view them as the most important asset.” Flexible tenure Maples Teesdale partner Rohan Campbell believes that occupiers also want tenure flexibility. “They want to have cost control as far as possible and the bells and whistles. Some funds we work with are offering shorter lease terms, but with what is almost a turnkey product – furnished, connected, so you can come in and start straight away. “It might be slightly higher priced, but there might be an all-in rent or there might be a fixed element of service charge. We’re hearing from real estate funds, for example, who perhaps traditionally were looking at more short-term returns but now they’re looking at strategies for more longer term income and to get into that operational space. “If you look at debt funders as well, the lenders are getting more confident with the sector and they’re starting to be more interested,” he said.  He added that there is risk for landlords regarding serviced offices because if they get it wrong they potentially will not be able to justify the costs of creating this type of space. But he said that many are hedging their bets by creating a mix of occupancy tenures within a building and only in locations where they believe there is demand. Customer environment But  John Gravett, head of real estate management at Cluttons, believes some landlords are already being left behind as this revolution unfolds. “People in our industry are struggling with that move to a more customer type of environment where they need to listen to the tenant about what they want, what their staff need and how they are going to interact with the building,” he said. “Those landlords are going to find themselves losing out to the more competitive landlords and serviced office providers.” It is also about connectivity and the need for landlords to innovate, Miu said. “They [occupiers] want to communicate easily with the world at speed,” he said, which is why ABP is introducing 5G at its scheme at Royal Albert Docks, and creating an onsite cloud server. But, Gravett added, until the infrastructure is right and connectivity works within the building, “it’s all aspirational”. It mostly boils down to cost  and layout of capital by investors and landlords, said Pittar, adding that building costs keep rising and it is still difficult to “quantify the bottom line gain from satisfied employees”.  And a mash-up of office and co-living is still a long way off in the UK and Ireland, according to Miu. “Yet entrepreneurs work 24/7 and they want to stay near their workspace, not waste time commuting, to give themselves a better lifestyle,” he said. Campbell believes this will catch on as younger generations struggle to find accommodation within a reasonable distance from work, and he expects investors to explore the potential.  As the noise from occupiers grows louder, traditional landlords may be providing the full serviced office experience sooner than anticipated. The panel ■ Rohan Campbell, partner, Maples Teesdale ■ Edward Pittar, partner, Malcolm Hollis ■ John Gravett, head of real estate management, Cluttons ■ David Hatcher, head of content, Estates Gazette (chairman) ■ John Miu, chief operating officer, ABP London, Royal Albert Dock To send feedback, e-mail louise.dransfield@egi.co.uk or tweet @DransfieldL or @estatesgazette