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Pandemic reinforces offices short lease trend

Image: interiordesign.net
Image: interiordesign.net

A new report by real estate advisor JLL focuses on a trend which was becoming apparent before Covid-19, and is strengthening because of it. While the report does not specifically involve Belgium, it is wide-ranging and its conclusions are likely to apply to all major office markets.

The subject of this report is that office leases are getting shorter. In Hong Kong, says JLL, an average office lease lasts three years. In the U.K., it’s six. In the U.S., it fell 15% in the first five months of 2020 to seven years — and it’s likely to fall further. Ben Munn, Global Flex Space Lead at JLL, explains: “The trend toward shorter leases is riding an accelerated trajectory as office users exercise caution and avoid making long-term decisions in the age of Covid-19. Corporations want the ability to react to a host of unknowns brought on by the coronavirus and economic pressures, so they’ll continue to pursue office space options that provide them with enhanced flexibility for the foreseeable future. Whittling down lease terms is certainly part of that effort.”

The recent spectacular rise of co-working, before the pandemic, was already a demonstration of the fact that companies were no longer wanting to be tied to long and inflexible leases. On this, and taking into account the fact that not all companies had joined the co-working trend, JLL says: ‘Many occupiers that hadn’t incorporated flexible office strategies before the virus may explore them in the future as a way of maintaining a more fluid portfolio. In addition to shorter lease terms, practices may include co-working memberships, suburban outposts and shifting some employees to permanent work-from-home arrangements. These trends are certain to challenge office markets.’

However, and reflecting the opinions of many in the industry, JLL nuances: ‘Having said that, we still expect companies to base site and occupancy decisions on productivity, innovation, collaboration, workforce recruitment and retention, as well as other financial and strategic objectives. Landlords who recognize and fulfil office users’ desire for agility will be best positioned to thrive in the future. A mix of traditional and flexible space is becoming even more important to office occupiers looking to make the most of their commercial real estate portfolios.’
Tim Harrup
27-07-2020
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