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The changing world of officesBy: Jonathan Ling, Associate Director, Stratton Creber Commercial

Jonathan Ling, Stratton Creber Commercial

The past few years have seen major changes to lease terms for offices, driven more by the charging of business rates on vacant commercial property than by the troubled economic times. Tenants are increasingly keen to be able to predict all the occupational costs they are committing to, which is exposing landlords to taking on some of the risk associated with variable costs.

These changes in lease terms have been widely discussed, but less attention has been paid to the ways in which occupier requirements have been changing recently.

The first change that became apparent in the dark days of 2009 (and one which was driven by the recession) was in occupiers’ size requirements. The average size of office being sought plummeted back then, and has not risen significantly since. The large majority of office requirements in Devon towns and cities are now below 1,500 sq ft, or less than a 15-person office. This has implications for landlords, who have to look at vacant offices to see how they can be subdivided to form smaller suites; sometimes splitting a larger office is easy and viable, but not in all cases. A larger number of smaller tenants suggests higher management costs and more intensive management for landlords, but with the advantage that a number of small tenants represent a better spread of risk than a single large one.

Another marked change in recent years has been the increased parking requirement. For the past decade, town planners have been insisting that new offices have no more than three parking spaces per 1,000 sq f, but with the average company in the UK now squeezing 20 per cent more desks into the same sized office as five years ago, the shortfall in parking allocations at many business parks is becoming more noticeable. An extra parking space can often make the difference between winning and losing a tenant.

A third change, this time unrelated to economic conditions, is the increasing awareness of disability access. While this was only a major concern for public bodies a few years ago, it is starting to filter down to private companies, both large and small, either because of their client base or for reasons of equal opportunities employment. While not every office building can comply fully with legislation (and period buildings can be a long way from being compliant), we are seeing more requests for modifications to existing buildings to accommodate disabled access to some extent.

Also driven by legislative changes, companies are beginning to wake up to the energy performance of offices. Current energy use and costs can be difficult to estimate (and the Energy Performance Certificates do very little to help), but occupiers are looking for landlords to install new lighting, boilers and even solar panels, to help reduce costs. The use of Green Leases is talked about in the industry, but at the coal-face, few agents have ever seen one, with the result that there is not yet the required dialogue between landlords (with a long-term interest in their property’s viability, and therefore the ones able to invest in property) and tenants (whose interest is in the shorter-term running costs).

However, recently, one factor has risen to top place in the list of office occupiers’ search criteria. More than anything else, companies are seeking good broadband capabilities, and many cite poor broadband as one of their main reasons for relocating. Broadband speeds and available options vary massively from one town to another, and within Exeter they vary greatly from one business park to another, and even between properties on the same business park.

Take a closer look at Exeter, for example. The city has a central telephone exchange, which is fibre-enabled, but most of the business parks link into peripheral exchanges, which have not been upgraded and are not currently scheduled for an upgrade. Even those business parks that link into the central – upgraded – exchange may find that their local cabinet (the green box on the street corner, full of telephone wires) has not been upgraded, while those which can get fibre to the cabinet may find it prohibitively expensive, as costs are based on the distance from the exchange. The result is that the best broadband is generally available in the city centre.

Given time and money, landlords can usually react to many of these changes in office demand, but the issue of broadband is not such an easy one to solve. Landlords are advised to obtain details of the broadband options available before going to market, and agents should try to offer advice on ways of improving current broadband speeds and the costs of doing so.

About the author

Jonathan Ling BA (Hons) MSc MRICS has been working as a surveyor in Exeter since 2000, and joined Stratton Creber Commercial in 2005. He specialises in property disposals, acquisitions and negotiations in the office and industrial sectors, and also deals with valuation work.

Jonathan enjoys the great outdoors, and dreams of kayaking in exotic places, although he has paddled no further afield than Scandiavia, Russia and the Med so far. He has a sense of adventure and travels to places normal people don’t go to and probably haven’t heard of. He lives in Exeter and has three children.

Features December 2012

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