Traditional leasing is a thing of the past — is this what you are seeing?

The pandemic has reshaped our working lives in ways we’re still grappling with today. With the rise of hybrid working and a shaky economic landscape, many commercial properties are struggling to find and retain tenants. This challenge is pushing some operators to make hasty decisions—often without the benefit of data.

Generally, occupation needs to be maintained at a high level (around 70%) for commercial property owners for them to remain profitable. One of the main issues in recent years has been the depreciation of demand and the increase in costs. This has done nothing but put these businesses in the red.

In a recent survey by Accessia, 99% of 200 UK asset managers reported that making money from commercial buildings is tougher post-pandemic. What’s more, 84% admitted they don’t analyse how their meeting rooms and spaces are used—missing out on valuable insight that could drive long-term solutions.

Instead of leveraging this data, many building operators are opting for flexible leases to secure short term gains. But with nearly 1 in 5 struggling to maintain occupancy, it’s clear that a reactive approach many not be suitable.

Have you noticed similar trends in your role?

Interestingly, only a third of operators believe that a flexible model could unlock new revenue streams, despite the changing and diversifying needs of SMEs. With fewer employees working from the office full-time, commercial property owners are feeling the pinch.

Alarmingly, 15% of operators admitted they don’t fully understand what their tenants want. While SMEs are increasingly drawn to shorter, flexible leases, 44% of operators are still focused on locking in tenants for five years or more to secure stable income. It’s clear then that the business model needs to change.

Does your business prefer a flexible lease?

Some operators are offering more flexible contracts to stay competitive, but Accessia argues that there’s a bigger, largely untapped opportunity here: coworking-style flex spaces. By analysing how tenants use their spaces, operators could shift from short term fixes to more stable, long term solutions.

Conventional leases creates too much of a risk for the property owner. According to Howard Cooke, lecturer in Corporate Real Estate, it would be far more beneficial to offer partnerships with landlords on specific buildings with a profit share or turnover rent model. This would enable the landlord to receive a base rent and a share of the performance of the business. At any rate, things need to become much more flexible.

So, what do you think? Is coworking the answer to revitalising office space profitability? How can we counteract the decline in traditional office leasing, or is moving away from this model the better option?