On the 4th Feb 2021, Mark Furness, CEO of essensys, hosted a roundtable at SPACE UK. The table explored why landlords are adopting more of a hospitality mindset when it comes to managing their assets. This blog summarises the key talking points; a report documenting the full findings of the table will be published in late February.
- James Pellatt, Director of Workplace & Innovation, Great Portland Estates
- Thais Galli, Managing Director Innovation, Tishman Speyer
- David Ebbrell, CEO, M7 Real Estate
- Oliver Knight, Head of Offices, LandSec
- James Penfold, Corporate Affairs Director, The Collective
- Natasha Guerra, CEO, Runway East
- James Lowery, Head of Storey, British Land
What does it mean to be a service provider in Real Estate?
The elephant in the room needed to be addressed; this shift to a service provider mindset was not driven by landlords themselves, but more a consequence of market demand. It’s the result of occupier expectations that are higher than ever.
“Occupiers have spoken” was used to describe the situation.
We asked the panel, what does this shift mean for landlords and is it important to adapt?
Thais Galli of Tishman Speyer put it bluntly, “it’s more important than ever”. It’s no longer good enough for landlords to offer a “glass box” and a set of keys in the hope that tenants remain. Landlords must plan how they’re going to get people excited about going to their space – if they don’t, tenants will be far less likely to remain and begin seeking more suitable places for their staff to work. This is key for tenants because if they don’t offer these places to their staff, talent will eventually jump ship. The panel shared they now see talent prioritising quality of space over higher salaries and this view is supported by research conducted in 2019 by Glassdoor (https://www.cnbc.com/2019/07/11/workers-value-a-strong-company-culture-over-higher-pay-study-claims.html).
Interestingly, James Penfold of The Collective mentioned how crucial he felt a sense of community is; it’s important landlords create spaces people want to be a part of. James Pellatt of Great Portland Estates said it’s good for landlords to think about how they can take away problems for occupiers but simultaneously be aware they can’t rely on a cookie-cutter approach for all tenants. Requirements will be varied; landlords who equip themselves with a well-crafted menu of options for tenants will be well-placed to succeed.
Mental wellbeing is now key too and people will be stricter with what they want to do with their day – if they’re expected to travel into the office, they will expect a more compelling experience than at home. Creating seamless experiences between colleagues who are in the office and working remotely will be critical and having engaging event spaces to host clients will also be important.
The closing remark of this segment was that;
How important is technology in this shift?
After discussing the ‘service provider’ role and why it’s important the table discussed the role technology plays in the shift.
Oliver Knight of Landsec made it clear that different types of tenants will require different levels of service and so landlords who can offer an array of services are positioned well. Technology can have such an impact on experience that advice from the table was for the office sector to look into other sectors for examples of how technology helps drive better experiences for people. Another key takeaway was that landlords are applying a partnership lens to their business; they’re thinking of those who occupy their spaces more as customers than as tenants.
James Lowery of British Land said that whilst it’s important to offer customers choice when it comes to services available, curating the right level of choice is key for landlords. Tenants must be given the ability to customise their space but within best practice boundaries set out by the landlord. This could be an indication that the onus of delivering great in-building experiences for tenants through technology is shifting more to landlords than ever before.
Natasha Guerra of Runway East reminded us that if landlords don’t deliver smooth experiences for tenants, they run the risk of damaging their brand. This further heightens the importance placed on technology to deliver frictionless experiences for tenants. David Ebbrell at M7 shared insight on how smaller tenants are demanding higher quality services from landlords too because of what they see larger tenants receiving. Technology that enables landlords to be agile – to cut and shape assets within their portfolio to accommodate tenant needs – will be key.
How much of your portfolio should be flex?
When it comes to percentage of portfolio that will be delivered as flex, the panel felt that putting a figure on it was not the best way forward. Ultimately, it comes down to market pressure and how this evolves; so to have a cap or a limit may not be the right approach at this point in time. James Pellatt advised that for landlords to have an easier time of understanding what to do with their portfolio, they’ll need access to data around how their space is being utilised.
Whilst discussing the mix of traditional and flex within a portfolio, the panel discussed a balance between how much of a building will be flex and what parts of the building will be packaged as flex. For example, you can use it to revitalise struggling floors of a building. The answer to these questions will be influenced by the types of tenant you want to attract – are you targeting fast growing start-ups or more established, enterprise businesses? These decisions should all affect what landlords do with their space and technology selected should be flexible enough to prevent landlords from being locked into situations for a long period of time. The ability to pivot and be agile is critical.
How is the shift to flex impacting valuations and investor relations?
How the implementation of flex is directly impacting valuations is still unclear; what will ultimately affect valuations is consistent cash flow and that comes from retaining tenants and attracting new ones.
When it comes to investor relations, Thais Galli made it clear how important it was to bring banks and lenders along for the journey with you when building a flex proposition. This ensures that together you can explore how flex will add value to a property not just financially but also based on attractiveness – ensuring it’s fit for purpose based on the requirements of modern-day tenants.
Now is the time to act if you want to remain relevant
The closing thoughts focussed on the fact that for landlords to remain relevant and adapt successfully, they should be agile enough to utilise any of their portfolio as flex and enable themselves to package space in ways that are attractive to post-pandemic tenants.
This shift to a service provider mindset will be key to a landlord’s survival, and it’s fuelled by technology.