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The Commercial Real Estate sector is a core pillar of the global economy with a market value of over $115 trillion, but it's also gone through one of the most transformational periods in recent history. The rise of remote and hybrid working has been swift, and business leaders the world over are in the process of re-configuring how they understand and approach planning for workspace.
At Desana we're committed to providing the tools and insight to do this effectively, and support those building agile and resilient portfolio's that reflect the changing CRE landscape.
There's certainly no shortage of views on the future of the sector and what we should expect from the months ahead. To cut through the noise, we sat down with some of the major players and decision makers to hear their predictions for 2024, drawn from their deep insight and experience of the market.
Some of the key takeaways are predictions of a growing allocation to flexible workspace in occupier portfolios and a blurring of the lines between flex, managed and fitted leases, as elasticity and adaptability of portfolios becomes increasingly important to hedge against uncertainty. Occupiers are also shifting focus from size to quality of workspace, with amenity spaces thriving as a means of making the office an exciting place for employees to get together and help retain talent.
Without further ado, let's hand it over to our generous partners who've taken the time to share their invaluable expert insight on the year ahead.
“The workspace of the future has to be flexible to meet the needs of the user for that particular day. The “traditional office / HQ” is still important but will become less of the % mix of a portfolio in the future, reducing long term inflexible financial commitments.
Portfolio elasticity will become a key workplace KPI, providing a measure of how quickly a “space” can be turned on or off as required to meet the demands of the business. Flex will become a major lever that CRE teams can pull on to improve portfolio elasticity, empowering real estate to meet the objectives of the business today and in the future.”
"Real Estate Markets will continue to be hard to navigate in 2024, with Corporate Occupiers of all sizes choosing to take short-medium decisions on their real estate footprint. Average office occupancy, currently around 35-40% in EMEA (Basking data) will increase and settle no higher than 50-55% resulting in the ‘Flight to Quality’ gathering pace, spurred on by environmental regulation tightening therefore reducing the supply of available office stock. ‘Half the Space, Twice the Quality’ is a saying heard more frequently across all sectors – balancing the workplace experience and incentivisation of employees to return to the office, with the increasing cost of occupying real estate.
The financial struggles affecting some of the larger players in the Flex Office Sector will spread across the LL community, with substantial amounts of corporate debt maturing over the next 12 months. Global interest rates are showing signs of stabilisation which provides a glimmer of hope for many but highly leveraged landlords and operators will see their margins threatened, potentially creating acquisition opportunities for more mature organisations."
"I predict 2024 will be another dynamic year for the flex sector. Our clients have told us that they expect to grow their allocation of flex in their portfolios to 25% over the next two years (today this number is 16% and last year this was just 8%). The key drivers for the growing consideration of flex space are uncertainty, cost and workplace effectiveness.
Our clients value the hedge that flex space provides them against uncertainty, they want to more closely align real estate spend against consumption and they want to get access to new and innovative workplaces to drive productivity and engagement. Having access to even more flexible models and wider networks of space, such as that enabled by Desana, will become increasingly attractive as our clients seek to further optimise portfolio performance."
"For a long time when we talked about serviced and managed office space we associated them with the start-up community, and whilst these occupiers still form a large part of the client base for operators, the demand for flexible office space has become far more diverse over recent years. There is a continued and growing demand for flexible office space including serviced and managed solutions. Occupiers are seeking, and we believe will continue to seek, agile and adaptable workspace’s that cater for their evolving needs, and providers and landlords are continuing to grow their portfolios within the sector.
With so many businesses now wanting the office to be an exciting place for staff to come together, attract new talent and continue to entice businesses back to the office, amenity space within buildings is thriving. As a result we’re seeing operators and providers in a bid to create more facility-driven spaces; from best-in-class gyms, events, roof terraces and wellness rooms. Many big brands in the past 6 months have laid out direction to staff on their return to office policy with some announcing a return to the office 4 days a week. Looking ahead to 2024, we expect to see amenity space grow even more, as demand continues to grow and a greater diversification of occupiers within the flex sector as businesses continue to adapt to hybrid working."
"We expect to see continued blurring of the lines between flex, managed and fitted leases. As large companies continue to turn to flexible office space we'll see key players in the industry shifting focus to capture these tenants and offer fitted, functional and amenity-rich spaces.
A rise in providers with B Corp certification, paired with requests for the green credentials of buildings from our clients, shows sustainability is becoming a key part of the decision-making process. Companies and employees are conscious of their environmental impact and subsequently taking measures to ensure they’re reducing their footprint, which will continue to increase."
