Aaron Higgins
Aaron is the Director of Boden Property, working with clients and candidates in Project Management, Development Management, Quantity Surveying and white collar site staff. He has his finger on the pulse of the UK property development and real estate markets and is always available to offer insight and advice.
After two years of Covid, people leaving the city in their droves and then returning at a similar pace, London real estate seems to be finding its feet again.
In fact, the take up of office space in the city is at a 3 year high.
But that doesn’t mean there aren’t still concerns for building owners in the city. Not least that occupiers still have a huge amount of uncertainty over their needs. Many are making long term decisions based on short term information. They’re trying to understand their real estate needs in an evolving working environment.
There are a lot of considerations in play for real estate occupiers planning their future requirements, including:
- Labour markets
- Macro economics
- Purpose vs Profits
- ESG agenda
- Supply chain distribution
- Brexit
But despite all this, business leaders are well aware of the importance that real estate plays in their overall business strategy. There are 3 dominant factors keeping it high on the agenda.
1. The new world of work
Actual and anticipated work styles have changed due to the pandemic. Hybrid working is now the norm, with 75% of global CEOs seeing hybrid as the future of their organisation, and 32% having already implemented it. The strength of the labour market will continue to push this agenda. The work call to work from home may be over, but workers are still asking for a large amount of flexibility. At the same time, many business leaders are looking to move to a more office first approach. Employers are having to find ways to accommodate both. But this means there isn’t a “one size fits all” response.
2. Need to strengthen culture and connection
Expectations for revenue and headcount growth are well beyond pre-pandemic levels. In fact they’re currently at a 7 year high. 71% are forecasting increased Capex and 76% forecasting increasing hiring. And many business leaders see the office environment as crucial for the onboarding of new employees, working together creatively and achieving growth.
3. Sustainability agenda
More than ever businesses are being judged on their ESG credentials. From attracting staff to winning work, companies are having to do more to prove that sustainability is core to their operation. Having a building that hits sustainability targets and collects sustainability data is key to a robust ESG strategy.
But with no “one size fits all” response, and occupiers having more divergent needs than ever, developers will need new levels of customer understanding and engagement. They will have to work more closely with their clients to be able to respond to changing real estate needs in real time.
So what is having the greatest impact on client real estate decisions?
Real estate owners and developers are finding themselves having to play a game of clairvoyance. They are trying to guess the direction of an ever-diversifying workforce in London. They’re trying to predict the reactions of business owners to the many uncertainties that they’re facing in the short to mid-term.
But there are three areas that are impacting the decisions that business owners and occupiers are making around real estate. If owners can get a good understanding on where their clients stand on each of them, they’ll be in a much stronger position moving forward.
Flexible working models:
While flexible working is now mainstream, it’s clear that there is no uniform approach to it, and there is unlikely to be. Different sectors are responding to the call for flexibility in different ways. But there is also huge disparity within sectors. And it’s unsurprising. Businesses need to offer an inspiring working environment alongside the flexibility employees are calling for to win talent.
But businesses need to make long term decisions and commitments based on short term behaviours. This is leading to size uncertainty. Will flexible working policies still stand in a year’s time? Or will staff wish to spend more time in the office and with their colleagues? As the economy shifts away from favouring the employee, will companies call for their staff to return to the office full time?
Real estate owners and property developers will have their work cut out for them over the coming 12 months as their clients attempt to make decisions that could change with very little warning.
Landlord partnerships:
Greater reliance on good partnerships can be the answer to the need for more flexibility and high-quality amenities. The reputation of the landlord to deliver a hospitality level of service for the duration of the real estate contract is key. Clients are looking for a meaningful relationship with their landlord throughout the duration of the contract, not just when issues arise.
And a great way of developing that relationship is through smart building technology and building apps. These can complement those regular interactions. Occupiers can get a better understanding of their own usage, as well as keeping abreast of their ESG goals such as energy consumption. Landlords are well placed to help occupiers reach their green goals. As many building owners look to upgrade their current provision, they’d be well advised to work with developers and re-fitters who are able to integrate this kind of tech into the building.
The influence of ESG:
Whilst ESG is front and centre of building design, occupiers are only just catching up. It’s now rising up the agenda of occupiers’ decision making. Accreditations are important but clients want to know how and why a building gained that accreditation, the data behind it, and how moving to the building will help them reach their CSR objectives. Clients require more thorough answers from landlords so they can report back to their boards and investors.
Again, working with property developers with a documented history of upgrading buildings in a sustainable way with sustainability data collection capabilities in built will be a good move for real estate owners who wish to build those long term, flexible relationships with their occupiers.
Real Estate in London in 2022
Landlords have a more multifaceted role going into 2022 and beyond. Occupiers are looking for property partners. Despite the uncertainty around size, the drive to provide high quality working space and robust ESG data means property in the city is still at a premium. Those real estate owners who can offer flexibility, partnership and sustainability credentials will be in demand over the next 12 months.
