Heading to MIPIM and UKREIIF, there’s optimism in the air for prime leasing

The spring in my step on the way to Cannes won’t just be about the warm weather or warm welcome – it will stem from the tentative start of a recovery we’re seeing in the prime corporate occupier space.

Expectations from occupiers have changed since Covid. There is no exact consensus on what good looks like, given the tailored demands of different occupiers, but the consistent factors are the need for quality, flexibility, and sustainability.

This is rooted in the need to attract both customers and colleagues alike. Businesses want space that gets people off their sofas and into offices and stores. The rocky period the industry has seen over the past few years has been less about a lack of available space, and more about the lack of the right type of space. Once developers and landlords clocked the need for buildings to be part workplace, part amenity/leisure destination, and 100% flexible, the situation started to shift.

For this reason, the prime leasing market is seeing growing demand. Space with high-quality fit out, accessible transport links, wellness provisions, and flexibility for future changes of use, are sought after. Retail brands want spaces capable of hosting unique, interesting, experimental concepts, or flagship experiential offerings that can’t be replicated at home or online. Meanwhile prime offices need to balance provision of top-quality traditional work areas with the widest range of amenities ever expected in the market. All occupiers need adaptability to give businesses the freedom to experiment and refine their spaces to meet market needs.

With expectations this high, the growing issue we’re now seeing for developers, investors and subsequently owners is that not every building is capable of supporting these wide-ranging requirements, or that sometimes retrofitting a structure up to current prime standards is simply not financially viable. Capital investment appetite is there – but not at any cost.

There are ways to mitigate this, at least in part. Financial viability is often a function of risk. By reducing the risk and unknown elements of a project, it can make more retrofit and refit proposals achievable. Regulatory and policy clarity is critical to this. The well documented backlog at the Building Safety Regulator in respect of Gateway 2 approvals and consequent delays in the planning and development processes exemplifies this. Many attendees at MIPIM and UKREiiF will be looking for policymakers to acknowledge the challenges and to provide as much clarity as possible on planned changes and timescales.

Once space is on the market, the remaining challenge is to balance the competing interests of occupiers and owners. The former tends to prioritise flexibility and high-quality in fit out, while the latter will understandably be looking for long-term security and regulatory compliance. The best advisory work in this context is that which can truly seek to understand both sides and where these interests align. Helping landlords acknowledge that short term flexibility might enable long-term commercial success – while helping tenants understand the policy backdrop to choices made by the building owners.

Even in the post-pandemic world, there’s nowhere better to soak up this understanding, build trust, and get the latest market insight, than in person at events like MIPIM and UKREiiF. I look forward to seeing much of my network there. Do drop me a line!