Miguel Angel Falcón, General Director of Lysander Spain, chaired the WORKPLACE 2022 Forum, organized by Cesine Jornadas and Metros 2 Magazine, which took place in the auditorium of the College of Technical Architects of Madrid on March 30th.
The Forum featured several specialist speakers from different areas of the workspace sector and several guests including representatives of Institutional Investment Funds, entrepreneurs from the air quality, furniture and Flex Space sectors.
The speakers discussed the importance of new technologies and digitisation in the “workplace management” sector, the new principles of “workplace strategy” that the main “occupiers” are beginning to implement, the possibilities and advantages of Flex Space, various proposals for work spaces and finally a sample of office buildings in industrial settings.
The most interesting part of the Forum was the subsequent discussion which speakers and guests discussed various topics related to office buildings, their transformation due to the new workplace and real estate strategies established by large users, the changes in leasing models and the impact of all these factors on the office sector.
It was commented that, to a large extent, the office building model was beginning to be defined by the strategies that, since mid-2020, are being proposed mainly by the large global “Occupiers”, such as Google, Microsoft, BMW, LinkedIn, American Express… and many more companies.
These combined real estate and workplace portfolio strategies include in-depth analysis of the activities of employees and departments as well as clients and partners in order to identify the use they make of the buildings and the key activities they carry out within them.
In general, and speaking of global averages, analysis shows that 50% of the work is concentrated individual work and the remaining 50% is collaborative within departments (25%) and between departments (25%). It is the tasks of collaboration and co-creation which take place in corporate spaces that are important to employees and departments. Therefore, they leave freedom for the bulk of the individual concentrated work to be carried out by the workers where they consider appropriate, combining WFH (Work From Home) with remote work (for example between trips), or at the corporate headquarters.
These needs, combined with a work from home policy of approximately 2 days per week, allow in most cases to reduce the space allocated to individual positions by up to 50%, however, due to the new majority use of offices (collaboration and co-creation and engagement), it is necessary to expand the surface of collaborative and meeting spaces.
The result of all this is that, as an average value, companies are obtaining a reduction in their area of around 30% compared to models from 5 or more years ago and that, with the reduction in space, generates an average annual saving in real estate costs of approximately 15%. As a result of this reduction, companies are having to incorporate more technology and management, and better equipment in their work spaces.
We also covered the growing concern of users to have greater contractual flexibility and try to have alternatives to a lease with a duration of 3+2 years, for all the space that the company expects to demand. In this sense, the various “flex space solutions”, if properly combined with the more corporate spaces in the portfolios of the large owners, will allow a solution to this concern of users. This will affect the commercial “mix” of current office buildings, generating buildings with a greater or lesser proportion of “flexspace” operated by third parties or by the owners directly.
Regarding the behavior of the Madrid office market, we noted that at the end of 2021 there was an increase in dynamism that resulted in an annual closing in 2021 of 420,000 sq. m. of transacted space, which represented an increase of 20% compared to 2020. However, this is still 20% below the annual average of the last 5 years.
Apparently, the possibilities of the “flexspace” for startups and small companies have affected operations below 250 sq. m. which fell 10% compared to the historical average and, on the other hand, large operations, between 1,000 sq. m. and 3,000 sq. m., had an increase of 27%, probably as a result of the reviews of the real estate and workplace strategies that international companies carried out during 2020.
We also dealt with the issue of investment and activity opportunities that we believe will lead the office market over the next few years, being the great rehabilitation of assets located in the CBD for adaptation to the needs of users and the new strategies of “ESG”. However, this activity is highly conditioned by the low average profitability of the sector, around 3.25% of initial yield, the scarcity of product and the restrictions on the financing of “value add” products.
We also discussed in detail what kind of adaptations are key in buildings to meet the expectations of the most sophisticated users. These included:
- LEED S&C Platinum or BREAAM Very Good certification,
- Designs aimed at a level of zero energy consumption
- Clean air and an increase in the level of air renewals per hour
- Large free floor heights, floor plan flexibility
- Highly efficient façades
- Technology and its control, both in the building and in the private spaces of the users trying to achieve adequate WIREDSCORE scores
Without doubt, an extremely interesting day that encourages us to continue to be very active in the office sector.
Miguel Ángel Falcón, 29 March 2022