ULI Releases Report “Reshaping the City: Zoning for a More Equitable, Resilient, and Sustainable Future”
Read the report.
March 22, 2023
WASHINGTON (March 22, 2023) – A new report on the future of the office by the Urban Land Institute (ULI) and The Instant Group finds that while offices are here to stay, the sector is in ‘a full state of flux.’
Analysis from the global survey proves that occupiers are still trying to figure out the impact of new activity-based workplace (ABW) strategies and hybrid working patterns, leading to demands for a flexible approach from landlords who, at the same time, are trying to cope with cyclical challenges following increasing interest rates, ongoing high inflation, and construction costs.
As part of the report, 285 office occupiers, landlords and third-party advisors in North America, Europe, Asia Pacific, Middle East, and South America responded to a survey. In addition, in-depth interviews with leading industry experts and two roundtables were held, to shed light on changing occupier demands, the response from landlords, and the impact on their business models.
While the office has a key role to play in occupiers’ workplace strategies in conveying the corporate culture, stimulating collaboration and mentoring new and younger team members, the report reveals that now only 14 percent of occupiers believe their existing workspace portfolios align completely with their business objectives and strategies.
According to research carried out by The Instant Group, demand for flex office space has increased 29 percent globally since the pandemic, in response to these changing demands.
And in parallel, the study shows that landlords (80 percent) even more so than occupiers (75 percent) expect greater lease flexibility and agility over the next five years. There are regional and sector variations on what that flexibility should look like but most agreement exists around new lease structures that allow occupiers to grow and shrink their office footprint within a single contract. “The way of the future will be much more of a partnership between landlord and occupier than previous landlord/tenant relationships,” suggests Ben Wright, Executive Director, Partnerships (Americas), The Instant Group.
The demand for shorter more flexible leases and pay-per-use services calls for business model reinventions: 62 percent of landlords expect a decrease in capital values with the current valuation model, which only awards long term contracts. With the office provider evolving from a space to space-as-a-service approach focusing on operational management of buildings, a new approach to real estate valuations is needed. Valuations need to acknowledge the value of providing additional services and amenities, building partnerships between landlords and occupiers, and a strong brand and reputation, while also recognizing the impact of flexibility and varying lease lengths.
For landlords, the time to improve energy efficiency is now. While ESG is a major focus for occupiers, less than two percent of asset owners feel they have the required capex to respond to ESG legislation-related requirements. With occupiers focused on reducing overall occupancy costs, improved energy efficiency is a prerequisite for landlords to retain tenants and preserve rental income. Tech features, like monitoring occupancy and energy efficiency, that were previously “nice to have”, will now be necessary, with data-capture essential to boosting transparency and achieving net zero targets.
“The office market may be rapidly evolving, but the physical workspace is here to stay. It just may look different than it used to,” says Billy Grayson, executive vice president, of Centers and Initiatives at ULI. “Both employer and employee needs are continuing to shift with each phase of the pandemic, and the industry is still learning how to navigate these changes. But one thing is clear: adapting as nimbly as possible will set property owners and occupiers up for success.”
Ben Wright, Executive Director, Partnerships (Americas), for The Instant Group, says, “This report demonstrated just how far off occupiers believe their portfolios are from their current business objectives, and the minimal confidence asset owners have in the strength of their capex to be able to respond to occupier and ESG related requirements. Creating better synergy between occupiers and landlords, and aligning on occupiers’ evolving needs and expectations to incorporate flexible workspace products and services, will better position both landlords and occupiers up to face the future of workspace, financially, environmentally, and culturally.”
An executive summary of the report can be found here.
About the Urban Land Institute
The Urban Land Institute is a non-profit education and research institute supported by its members. Its mission is to shape the future of the built environment for transformative impact in communities worldwide. Established in 1936, the institute has more than 45,000 members worldwide representing all aspects of land use and development disciplines. For more information on ULI, please visit uli.org, or follow us on Twitter, Facebook, LinkedIn, and Instagram.
About The Instant Group
The Instant Group has been rethinking workspace since 1999 with over 500 experts working globally across more than 175 countries. Instant’s digital platforms constitute the world’s largest digital marketplace for flexible workspace listing meeting rooms, virtual offices, flexible office space and coworking memberships. Its global team advises on commercial real estate solutions from serviced offices to fully customized managed offices, and consulting services for portfolio and net zero strategies. Instant’s approach enables agility, hybrid working solutions and improved operational resilience for more than 250,000 businesses every year. Clients include Prudential, Booking.com, Shell, Jaguar Land Rover and GSK. Instant has global offices including London, Paris, New York, Hong Kong, Singapore and Sydney.
Don’t have an account? Sign up for a ULI guest account.