By Stephen Haymes, Director of The 50plus
The office landscape is changing. It is driven by the rapid spread of hybrid working models. This change is not just a trend. It is a fundamental shift in how businesses operate and use offices. As companies adopt flexible working more, the need for large offices is falling. This is making property owners rethink how to attract and keep high-quality tenants.
According to a survey by PwC, 83% of employers now believe the shift to remote work has been successful for their company. This new working model has several implications for the commercial property market. Companies are re-evaluating their office needs. This is leading to a big downsizing. They are moving from traditional, big buildings to compact, multifunctional ones. This trend is driven by the realisation that hybrid working can reduce overhead costs without compromising productivity. JLL predicts 30% of office space to be flexible in some form by 2030. According to CBRE, the global office vacancy rate reached 13% by the end of 2023, the highest level in a decade. This marks a significant increase from the pre-pandemic rate of around 9%. As a result, the commercial office market has more vacancies and less rental income. It is tougher than ever to stay profitable.
This market is extremely competitive. The need for good property maintenance cannot be overlooked. To attract and keep good tenants, property owners must ensure their buildings are well-maintained, safe, and good for work. This encompasses everything from regular cleaning and HVAC maintenance to ensuring high-speed internet connectivity and modern amenities.
Today, high-quality maintenance is no longer a luxury but a necessity. Tenants are shrewder. They seek properties that offer a seamless blend of comfort, functionality, and aesthetics. Well-maintained properties signal to potential tenants that the landlord is committed to providing a high standard of service, which can be a factor in lease negotiations.
Property owners face three options. They can respond to the changing market by mothballing, refurbishing, or repurposing their buildings.
1. Mothballing: For some, the most viable option may be to temporarily close underutilised spaces, maintaining them minimally until the demand increases. This strategy requires careful planning to ensure the building remains in good condition and can be quickly brought back on the market when needed.
2. Refurbishing: Upgrading existing office spaces to meet the new needs of tenants is another approach. This might involve redesigning interiors to support flexible work, adding state-of-the-art technology and improving communal areas to encourage collaboration when employees are on-site.
3. Repurposing: The most transformative option involves repurposing office buildings for alternative uses. Possible options include turning offices into homes, co-working spaces, or mixed-use developments. These combine offices, stores, and leisure facilities. This requires significant investment but can provide a long-term solution to declining office space demand.
The shift towards hybrid working is reshaping the commercial office market. Commercial landlords must adapt to this new reality by prioritising maintenance and considering innovative approaches to space utilisation. This is a market with higher tenant expectations. The commitment to keeping and improving property standards will be crucial. It will help to attract and keep top-tier tenants.
As we navigate this new era, the ability to offer well-maintained, flexible, and appealing workspaces will determine the success of commercial properties. By embracing these changes and investing in quality maintenance and creative solutions, property owners can not only survive but thrive in the evolving commercial property landscape.