According to Jones Lang LaSalle's Offices 2020 Report, the traditional landlord-tenant relationship is undergoing a seismic change. According to the study, 80% of real estate professionals feel tenants are becoming more powerful and demanding more from their landlords and investors. homes
"Tenants recognize they are in a stronger negotiating position than ever before and are revisiting their real estate strategies to ensure their workplace is working harder for their overall business," Benoît du Passage, Managing Director - France and Southern Europe, Jones Lang LaSalle, and executive sponsor of the client project, tells the World Property Channel.
"The property landscape is shifting as the power balance shifts, resulting in increasing collaboration between landlords and developers. We expect the power transfer to tenants to last at least ten years, ahead of cyclical patterns."
The study effort is being led by Bill Page, Director, EMEA Research, Jones Lang LaSalle "The European office market has undergone a paradigm shift as demand has become increasingly important. Tenants have a strong bargaining power in the market and can have a big say in what is built. Their brief can get a lot more specific, covering everything from site to capacity to density to sustainability, security, and air conditioning to sprinklers. Furthermore, in the absence of debt financing, flexible, long-term collaborations with developers and outsourced service providers would yield greater results for both parties."
He continued, "All parties can benefit from a smart upfront investment. The capacity of developers to form long-term connections with their clients and outsourced service providers, anticipate their needs, and locate and configure space in a way that adds value is what sets them apart. Furthermore, office development funding is unlikely to recover to pre-2007 levels, necessitating creative cooperation with corporate clients to bridge the gap."
Furthermore, as tenants demand more flexible workplace solutions, lease periods are shortening. The average commercial office lease in Central London has decreased by 50% in the last decade, from 12.7 years in 2001 to 7.9 years in 2011. By 2020, the average lease period in core Western European markets is predicted to be five years. As tenant leases expire more frequently, churn will rise, albeit net absorption - the growth in occupied stock - may decrease as space is occupied more effectively.
Benoît du Passage came to a conclusion, "Tenants need efficient working environments and are not afraid to ask for what they want. Tenants of high caliber are required by developers. Because property has moved to the top of the corporate agenda, landlords and tenants must work together to create a meaningful relationship that benefits both parties."