Flexible leases and satellite spaces: the future of office real estate

Tailor-made leasing models, satellite offices at the edge of cities, and quality spaces over square-footage…That’s what the next few years of office life looks like, according to the Future of Work 2020: A global real estate players’ point of view report, from the Urban Land Institute.

The “first global report to look at the impact of the Future of Work on real estate and cities over the next three to five years” surveyed 555 real estate professionals worldwide, with respondents including investors, developers, architects, planners, and other service providers.

The report finds that real estate professionals expect massive change in the way in which businesses operate. Ninety-six per cent of respondents predict there will be more home working, remote working away from the home (72 per cent), and the adoption of satellite offices at the edge of cities (67 per cent).

“The resulting ecosystem of workplaces will accelerate a blending of uses between residential, hospitality and office spaces, and a shift in language from ‘office’ to ‘workspace’,” the report notes.

The findings indicate the expectation is that physical office spaces will play a key role as a hub, rather than simply a place to work. As a result, real estate will shift to offer flexible leases, and co-working spaces.

Respondents “continue to see a key role for physical office space in creating a corporate culture” (96 per cent) and in “recruiting and retaining employees” (93 per cent).

Expected impacts on the real estate industry include a demand for flexible office footprints, lease contracts, and co-working facilities by large corporate occupiers.

Fifty-three per cent of respondents “anticipate a decrease in the office space needed by their organisation”, while 81 per cent anticipate a demand for collaborative work spaces.

The report speculates these shifts may lead to “a much faster obsolescence of buildings and future significant repurposing of office buildings”.

“It is no longer just about selling ‘offices’ but ‘workspaces’ for real estate players,” the report notes.

“Developers and owners will need to offer flexible, scalable solutions to attract tenants.”

Data-tracking of how spaces are used will become “vital” in ascertaining how much room a company needs, and during what periods. Investors will look for long-term security, while lease-holders will want flexibility in regards to such contractual agreements.

Finding that middle ground will be critical.

“Flexibility is the consistent demand we are hearing,” CEO of Urban Land Institute Europe, Lisette van Doorn said.

“Employees expect it from their employers and corporates from their landlords. Especially over the shorter term, this focus is accompanied with a drive by corporates to save costs, as many try to cope with the negative economic impacts deriving from the pandemic.

“At the same time, there is a strong focus on the quality and location of the physical space as a key element to attract and retain talent and expression of a corporate’s culture,” Ms van Doorn stated.

“This is also closely connected to an increasing focus on Environmental, Social and Governance, both by citizens and corporates.

“This provides opportunities for real estate players who have embedded these elements in their corporate strategies and buildings, for their branding and to build stronger, longer-lasting relationships with tenants and users.”

Read the report here

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Nathan Jolly

Nathan Jolly was an in-house journalist with Elite Agent. He worked with the company from July 2020 to December 2020.