February 2, 2004—The majority of office occupiers are prepared to pay higher rent for more flexible lease terms, with almost 90% saying that a length of 10 years or less would be ideal.
These are some of the central findings from a corporate occupier survey carried out by surveyors Drivers Jonas. DJ questioned over 100 property and finance directors from a cross-section of sectors around the UK, including some of the countrys largest corporations.
This survey emphasized occupiers increasing need for flexibility. 59% said they would pay for more flexible lease terms. 87% preferred lease lengths of 10 years or less, 71% preferred rolling breaks. As the business cycle has become shorter, DJ notes, the property sector is seeing continuing pressure from occupiers to have shorter, more flexible terms.
The survey also found that occupiers have become dramatically aware of total costs to manage their portfolios. This reflects the importance of cost control in the current economic climate, according to DJ. On a related issue, the research found that property directors have come under increasing pressure to know the costs of the space they occupy. The survey uncovered a dramatic increase in benchmarking to help control property outgoings.
Perhaps in response to these pressures, there has been a movement towards more sophisticated property data management: 53% now use web-enabled database tools.
In contrast, DJ found that since its last survey there has been an alarming loss of focus when aligning a company’s property strategy with the business plan. Only 66% of respondents have a property strategy integrated within their overall business plan—down form 88% in 1998.
Commenting on the results, corporate real estate partner Nigel Grice said: “Since 1998, when our last survey was conducted, we have seen a major increase in general awareness within the larger occupiers of the true cost to the business of their space. The last six years have witnessed a significant effort to benchmark overall property costs in order to reduce these expenses over time.”
But, he added: “In the current economic downturn it is worrying that such a large number of major occupiers are still not thinking strategically when it comes to managing their property assets. Property is still too far down the corporate decision making process for property managers or financial directors to promote a balanced, forward thinking agenda.
“Property is generally a slow moving beast and a reactive approach undoubtedly leads to costly mistakes,” Grice concluded. For more information contact Drivers Jonas.
—Elliott Chase
Reprinted with permission; copyright 2004 i-FM
