When it comes to lease negotiations, office tenants are becoming experts in rubbing salt in the wounds. The mainstreaming of remote work is responsible for much of the woes the asset class is experiencing right now yet 39% of tenants want to incorporate some formula into their lease to better match their costs to their office attendance traffic patterns. One idea: paying less rent until they reach that “steady-state” attendance threshold.
This is according to a CBRE survey that looked at what 207 companies in the U.S. are doing with their office space.
It is an interesting finding that bubbled up from the report’s overarching theme, which is that after three years of mostly remote work, office tenants are getting a handle on what their space needs are amid the fluctuating numbers of their onsite staff.
A majority or 60% now have a better idea about the numbers who work on site, up from last year’s 43%, according to CBRE.
As a result of head counting, they know better how much total square footage they need, along with specifics on shared offices/cubicles/desks and auxiliary or amenity spaces staff that staff values most. But due to fluctuations in staffing and schedules, the report also found that 38% anticipate that attendance levels may increase, making flexibility in a space’s size and layout key to being able to pivot to varying scenarios.
In general, more than 53% expect to need less space over the next three years, compared to 46% who expect no change or for demand to expand. As a result, 58% are renewing their leases but with less space; 49% are negotiating existing lease terms because they think they have more leverage due to the changing office dynamic; 49% are letting existing leases expire, and 32% are relocating to improve their quality of space.
But because even the best-laid plans may go awry and need to change, having flexibility is wise, said Manish Kashyap, CBRE’s Global President of Advisory & Transaction Services, “Real estate evolves to accommodate changes in human behavior, and we’re seeing that as the office market adapts to hybrid work,” he said.
And Kashyap reiterates the oft-repeated declaration by many landlords that the office isn’t going away but remains a cornerstone of employee engagement. “Our survey found that more than three quarters of companies want employees in the office at least half the time,” he says.
The survey also revealed that many office managers are seeking additional options to adjust their spaces. For example, 51% are interested in landlords offering access to shared amenities such as meeting space and tenant lounges, while 34% are interested in access to build-outs and furnished office suites that can be quickly occupied when more space is needed.
Favorite Amenities
Because office commuters figure prominently into lease decision, three of the top 10 amenities reported reflect needs in getting to and from an office such as proximity to public transportation at the top of the wish list with 59% of companies prioritizing this, ability to park a car as a close second with 54% desiring this and electric vehicle charging station a request of 30%.
Other amenities desired are having on-site café food and beverage, shared meeting space, sustainable building features and operations, fitness facilities, indoor air-quality, outdoor amenities or terrace and building amenity space.
