This article originally appeared in Property Week on 8th January 2024
I agree with the trepidation expressed in Property Week’s recent article ‘Storm clouds are gathering over the office market’.
However, hope is far from lost. With a wave of leases coming up for renewal and valuations falling, we are certainly approaching a pivotal time within the office market. Although sentiments of doom and gloom have dominated the discussion, this period of turbulence presents a great opportunity for those equipped with the right tools.
In light of increasing hybrid and remote working, many companies are making decisions about the future of their office footprints. Giants such as HSBC and Meta have already led the way by reducing their office spaces. As swathes of leases begin to expire, we are likely to see more occupiers follow suit and downsize. Paired with increased expectations of the experience and aesthetic of the workplace, this has encouraged a trend towards smaller, higher-quality spaces.
In the first half of this year, high-quality new or refurbished office space was responsible for almost two-thirds of transactions. This trend is expected to continue, and only the highest-quality office space will continue to attract long-term tenants in the coming years. This means it is more important than ever for asset managers to have full insight and control of the quality and performance of their portfolio to stay up to date with refurbishments. Many asset managers still rely on manual methods such as Excel spreadsheets, which are outdated and often inaccurate. What is needed is bespoke, fit-for-purpose technology to track, analyse and ultimately improve asset performance.
Strong environmental, social and governance (ESG) credentials are becoming an increasingly important facet of a high-quality office. PwC reports that 83% of consumers think companies should actively shape ESG best practices, and 86% of employees prefer to support or work for companies that sympathise with the same causes.
Strong sustainability performance is also becoming a regulatory necessity. Tightening energy performance certificate (EPC) regulations have been impossible to ignore. Current and pending legislative updates threaten financial penalties and assets becoming unlettable or even stranded. A substantial 86% of commercial landlords will need to make upgrades to meet new EPC legislation, and there is an estimated £1bn annually in rental income at risk. In order to keep up with regulations, asset managers need full transparency and control of the EPC ratings of their portfolios. Many are not tracking EPC performance at all, or relying on inappropriate systems or manual records. A dynamic system that collates, stores and analyses EPC ratings of an entire portfolio can be transformative in ensuring assets reach their full potential and maintain high occupancy rates.
This article originally appeared in Property Week on 8th January 2024
