17% of Office Occupiers Hunting

A recent report from the real estate division of UK national law firm Irwin Mitchell surveyed tenants attitudes to the properties they occupy, what their plans are for the future and relationships between landlord and tenants relationships.

The firm spoke to senior decision makers at over 250 companies, who together employ a total of 111,680 staff. The companies range from smaller companies employing less than 200 people to the largest who employ over 6,100 staff. 

Irwin Mitchell asked businesses whether they were planning to change their business premises requirements in the next 12 months. Whilst over 80% of businesses said they intend to stay in the same premises in the next 12 months, 16.8% plan to relocate or take on more space and only 2.4% said they planned to reduce space. The availability of finance did not seem to be a factor in influencing this decision with 88% of respondents saying it did not impact on their planning and only 12% saying that it did.

These figures overlap with Metropolis research, which finds that over 1,000 UK companies currently have requirements to relocate in the next two years or are approaching a lease expiry, which as a proportion of all office space transacted and recorded by Metropolis in the last ten years, represents some 20% of the market.

The UK survey asked what the most important factor was in their premises decision-making. In total 69% of the businesses placed  location first. The second most important factor was cost, followed by workforce accessibility and transport links. Of all the factors, energy efficiency was the least important, with no businesses classing it as a top priority.

The responses chime with a snapshot survey of 100 London occupiers, carried out last quarter by Irwin Mitchell, which also showed that location (34%), and then cost (24%) were the most important factors in making property decisions. In London, the quality of the building was ranked third (14%), perhaps illustrating a need to attract employees by taking good quality space.

The survey also asked about increased online working practices, and 43% consider that this will result in businesses
requiring less office space in the future, balanced by 40% thinking requirements will stay the same. Only 16% of businesses thought online working would mean they would need more office space. However, only a very small percentage said they personally plan to reduce their premises requirements in the next 12 months due to online working, indicating that a reduction in office space requirements due to online working may be a longer term trend.

Metropolis research has found that landlords have adapted to the recession, downsizing and companies needing less space by offering shorter leases (averaging not much more than 6 years) and falling rents in real terms. Although there are signs of lease lengths and rents starting to rise in London as office availability shrinks.

It appears that business occupiers attitudes to property are becoming increasingly confident in the context of an economic upturn.  Landlords are more flexible and accommodating than in the past. In recent years landlords have had to improve their offer to attract the best tenants in difficult markets.

With 17% of businesses saying they plan to expand or relocate, but the majority wishing to stay in-situ this situation will be particularly critical in London, as the balance of power swings back towards landlords due to declining office supply.

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