The landlord/tenant relationship is changing
Article3 min23 May 2017
Changing office dynamics are redefining the landlord/commercial tenant relationship.
The days of commercial property owners lording it over their office tenants with a take-it-or-leave approach to leases are long gone. With today’s businesses needing to respond quickly to a more competitive and uncertain trading environment, landlords can no longer get away with behaving like simple rent collectors.
From setting and forgetting a lease for five years or more, the landlord/commercial tenant relationship has morphed into partnering for mutual benefit.
The cost of office space is typically the biggest impost after wages, and what today’s companies most require is flexible work spaces which can accommodate fluctuating staff numbers.
Because the bargaining power between tenant and landlord is more equally balanced than 20 years ago, this demand for adaptable space usage is leading to a more customer-centric relationship.
Commercial landlords are gradually adopting a proactive management style that embeds sustainability and flexibility within tenant relationships. For example, instead of treating leases as transactional, landlords are now invested in acquiring deeper understanding of the rationale underscoring a company’s approach to activity, people and workplace.
In one outstanding illustration of the new landlord-tenant relationship, Dexus has simplified its standard office and industrial lease from 75 pages into a 25-page document by proactively managing issues arising during a lease term, rather than overly relying on legal documents.
Closer collaboration between landlords and their office tenants reflects a move away from treating bricks and mortar as a one-type-fits-all commodity, to focusing on customised solutions for individual customers.
In a business environment where constant disruption makes the workforce landscape hard to predict, flexibility around floor space is now seen as a moving feast. Today’s lease terms tend to be shorter, and often allow tenants to de-risk the future by resetting their space needs at regular intervals.
Then there are smaller companies, typically in the technology space, that have integrated short form leases into their long-term workplace strategy. To cater to this growing end of the market, property groups like Dexus have established office facilities, for companies large and small, that need greater flexibility.
What landlords now recognise, says Dexus Head of Office Leasing Chris Hynes, is that customised solutions foster the most durable landlord/tenant partnerships. Such durability is the ultimate win-win for both parties.
“How people actually use space is having a growing influence on a company’s ability to attract and retain staff, while also boosting innovation,” says Hynes.
Don’t be too fixated on space, as long as you factor size adjustments into regular reviews
Flexible floor space is at the top of any company’s wish list, but other key considerations are finding their way into today’s customised solutions. These are usually services that add value to staff. For example, hotel-style, end-of-trip facilities – such as showers, lockers, bike storage and gyms – that bridge the gap between the workplace and home while fostering wellness, sustainability and security.
A growing number of companies are combining flexibility with quality amenities to reflect the culture of their organisation. Nowhere is this more on display than within high-growth software giant Atlassian. Owing to the nature of its business, Atlassian has a workplace diametrically different from, for example, a mid-tier professional services firm.
“Due to shared amenities that companies no longer have to provide themselves, like child care facilities, shared internet and meeting venues, workplaces are looking more like home,” says Hynes.
“It’s also not uncommon to see pets in the workplace.”
A sense of place
Given that no two companies are the same, it’s important to fully understand the unique needs of your staff before entering lease negotiations. In addition to flexibility around floor space, look for premises offering good access to public transport and shared amenities within the building, such as corporate meeting spaces, internet connectivity in the lobby, access to public transport, and retail offerings – including food, post office, banks and chemist – plus end-of-trip facilities.
To ensure your lease arrangements are in the best interests of the people who work for you, it’s important to be as open and honest during negotiations with landlords as possible. Taking a dollars and cents approach to leasing may save you money in the short term. However, over-committing to low quality buildings in a poor location can have a major negative human impact.
If you’re looking for a 10,000-plus square metre floor plate, Hynes recommends searching for office space up to two years in advance.
“Don’t be too fixated on space, as long as you factor size adjustments into regular reviews,” advises Hynes.
“The bigger issue is having the right office space, with the right amenities in the right location that can help to attract and retain staff.”