The commercial real estate market has always been competitive – the post-pandemic market is no different. This is how Built to Lease and Value Add services are helping landlords adapt to market demand.
Rather than completely re-inventing where and how we work, COVID-19 has accelerated changes that were already taking shape before the pandemic. There is no doubt that the boundaries between physical and digital workspace have been permanently blurred, but it is important to note that the world’s market leaders, both real estate owners and occupiers, have been using technology and design to create offices that reflect the changing ways people use workspace for quite some time.
With a high volume of operators providing a diverse range of offerings, the landlord market is especially competitive. Shell and core, Cat A and Built to Lease combinations have provided landlords with the refurbishment offerings they need to get tenants in their spaces quickly. However, landlords have been hesitant to adopt new procurement methods until recently. “Landlords have learnt a lot over the last few years,” explains Oktra Design Director Dom Dugan, citing the recent rise in collaboration with operators on the basis of profit share schemes as an example.
Design and build is chief among these new procurement methods, specifically Value Add and Built to Lease services which are tailored to optimise the performance of commercial assets and assist in achieving maximum return on investment. How exactly do they do that? By fusing technical excellence with the flexibility required to produce standout offerings as quickly, simply and cost-effectively as possible.
Design and build services come with an in-depth understanding of tenant requirements as a result of the experience these companies have delivering spaces for tenants. It’s no secret that a clear grasp of tenant requirements separates successful landlord offerings from the rest, making this particular skill and knowledge set absolutely critical. Value Add depends on a precise understanding of target tenants and uses their wants and needs to develop a design scheme that updates current properties: it’s a cost-effective solution that leads to added return on investment.
An accurate interpretation of the project background is key to Value Add delivery and design and build teams work closely with landlord agents, tenant agents and client teams to agree the scheme throughout the Value Add process. A design and build firm that’s experienced in landlord works will know that the Internal Rate of Return (IRR) is crucial to funds and landlords, and will influence the IRR by reducing Cap-ex and increasing delivery speed without compromising on design and delivery. The result is a high-quality project that is hugely desirable to incoming tenants but, more importantly, achieves a higher return on investment.
This diagram shows the Value Add cycle according to our design and delivery process.
Built to Lease services are designed with commercial intent and ensure the best return possible on the final space by maximising asset performance from the beginning. Like Value Add, knowledge of tenant requirements plays a major role in Built to Lease projects which are designed and built specifically for target tenants. These spaces provide everything tenants need to run their business from day one, improving commercial leasing capability, boosting tenant investment confidence and reducing vacancy rates.
Because Built to Lease spaces attract a broader range of potential tenants and enhances the price per sq ft of the space, they also achieve higher rents. Design and build teams are able to collaborate with building owners, managers and leasing agents to create effective marketing campaigns that build the property’s profile. Because the landlord undertakes the majority of fit out works in these instances, tenants save on initial costs and the landlord can then reduce contributions and charge a higher rent over the course of the tenancy. Future-proof designs that are built to specified standards mean Built to Lease fit outs can last across multiple tenancies.
A closer look at our Built to Lease process.
To gain further insight as to flexibility’s role in today’s commercial real estate market, the changing relationship between tenants and landlords, and how the future workspace is blending the physical and digital worlds together, watch the full webinar on the right.