THE RACE FOR SPACE

24 CUSHMAN & WAKEFIELD 25 RACE FOR SPACE OCCUPIER SURVEY ANALYSIS OCCUPIER INTERVIEW ANALYSIS “WE WOULD ALWAYS SAY LOCATION IS TOP OF THE AGENDA. IT’S ALWAYS LOCATION. THERE IS SO MUCH DEMAND TO BE IN THE RIGHT PART OF LONDON.” A Central London Occupier During our occupier interviews, the term ‘flexibility’ was the most frequently mentioned. Occupiers want flexibility in terms of the lease length such as the ability to have an earlier break option. This might now comprise a ‘core’ space-take with break options on certain floors. But the flexibility that occupiers need is changing; they also want options to decrease the amount of space they commit to in the run-up to practical completion. Once the ‘Flexibility is king’ Source: Cushman & Wakefield Figure 20 Importance of factors for occupiers selecting a building Figure 19 Word Cloud showing Frequency of Key Words During Occupier Interviews Occupiers put cost as the most important selection criteria when considering a pre-let transaction. This was closely followed by location, which despite being mentioned more frequently in interviews, was consistently seen as secondary to cost. Occupiers put cost as the most important selection criteria when considering a pre-let transaction. This was closely followed by location, which despite being mentioned more frequently in interviews, was consistently seen as secondary to cost. One of the reasons why location was seen as such a vital factor in occupier decision-making was that occupiers are able to change or mitigate many of the other factors through fit-out, but the location is fixed. Some occupiers felt that as long as a building had the fundamentals (good natural light, fresh air provision, workable floor plates) then any shortcomings of the building could be overcome, if the location worked. Amenities were viewed as the least important in relative terms, although several occupiers mentioned that if they were committing to a pre-let then they would have an expectation that the scheme had a certain level of on-site or nearby amenity. Specifically, gyms were cited as vital to nearly all of the occupiers we interviewed or surveyed. Some occupiers wanted the gym to be located within the building itself, whereas others were open to walking a short distance to the gym. Several occupiers mentioned that whilst employee wellbeing was now on the agenda for their decision-making, it was by no means the most important. Occupiers did, however, say that much of their wellbeing agenda could be addressed by their own fit-out. Some occupiers were accepting of a longer-term commitment, despite the increasing need for flexibility. There was a general perception that a 15-year lease, for instance, was still of value. In fact, they would require a longer term to amortise the costs of their fit-out. Given that a pre-let is often for a HQ or strategically important office, occupiers are often willing to ‘put down roots.’ 0 1 2 3 4 5 6 AMENITIES FLOORPLATE SIZE TIMING OF DELIVERY TRANSPORT LOCATION COST One recurrent theme in our interviews was that of ‘connectivity.’ Whilst internet connectivity is clearly important, our interviewees were more concerned with physical connectivity. Occupiers want connected spaces within a building, perhaps a central break-out area or vertical connectivity between floors via staircases. This demand was confirmed during out interactions with landlords, who said this had become a more frequent request. All the occupiers we spoke to said that if they were to look for another pre-let in Central London, they would start their search earlier, often four years prior to lease event or more. “But what about Brexit?” One of the most frequently debated topics in the media is how the EU referendum result has impacted occupiers’ decisions to commit to London. Whilst there has clearly been greater emphasis placed on due diligence, and perhaps a great sensitivity to costs, major occupiers have continued to commit to the London office market. This is because the fundamentals of London’s attractiveness as a city remain in place; access to an educated talent pool, good quality of buildings, gateway to other markets and an excellent transport network. We have seen such a variety of occupiers very publicly commit to London, such as Apple, Facebook, Wells Fargo, Amazon, Mimecast, Dentsu Aegis and LinkedIn. Whilst there have been some consolidations, there has also been a number of expansions, demonstrating occupiers’ expectations for growth in the coming years. Interestingly, one Central London occupier was more concerned with the risk to their business posed by artificial intelligence and technology than the repercussions of Brexit. building is completed, they might want options to expand within the building should they need to. Beyond lease flexibility, occupiers want offices that allow them to adapt their space over time, as their business needs or workplace trends evolve. Although some of this adaptability will be incorporated into the tenant’s own fit-out, the building itself needs to lend itself to these changes. WELLBEING LOCATION SPACE IMPACT DESIGN CHANGE FLEXIBILITY OPTIONS COLLABORATION COMMITMENT GYM LEASE TECHNOLOGY TOGETHER STANDARD VISULAISING WORK SECURE NEED ENVIRONEMNT AMENITIES AMENITIES LONDON CHOICE RISK PRODUCT FUNDEMENTALS FIT-OUT CONNECTIVITY RETAIL SPACE MONEY MONEY MOVES OPPORTUNITY CHOICE FLOORPLAN TALENT ENABLE GROWTH IMPRESS GYM WELLNESS INCENTIVES FUTURE REDESIGN DESIGN CREATIVITY CREATIVITY PEOPLE FEEL STAIRCASE