While the “flight to quality” has dominated headlines, certain pressures are prompting a growing number of occupiers to take a more tactical approach. In this piece, Will Easterfield, Surveyor in our Commercial Agency team, explores the emerging “flight to value,” offering insight into how occupiers can balance quality and cost by making informed decisions in a changing market.

In today’s market, occupiers are increasingly valuing the quality of their office spaces. Whether it’s tempting employees back to the office or supporting their own ESG commitments the “flight to quality” has become a familiar phrase in the industry. However, with the cost of premium space rising dramatically, the more savvy occupiers are seeking good value propositions without compromising quality of amenity provision or ESG credentials.

So why is this happening?

Premium rents are on the rise, here’s why:

The construction industry, in response to this shift in demand, has struggled to keep pace. Crippled by abnormally high build costs and continued planning restrictions, the market suffered from a lag of office space under construction in the City. ‘Best in Class’ office space, therefore, is chronically under supplied, ultimately creating an increasingly landlord friendly market. Consequently, landlords are capitalising on tightening prime office vacancy rates across both the City and the West End, by adopting more hardnosed negotiation and using this leverage to push rents to and above market levels.

At the same time that best-in-class space has faced severe supply constraints and exponentially rising rents, older buildings with second-hand fit outs have struggled to compete, offering neither true affordability nor the full benefits of a brand-new development. With 2030 EPC deadlines approaching and tenant expectations rising, many landlords have little choice but to refurbish their properties. This creates an opportunity for savvy occupiers to secure value by leasing comprehensively refurbished or repositioned offices. While not entirely new, these buildings often benefit from significant investment, in ESG initiatives, upgraded amenities and modern desirable workspaces.

So, what are the alternatives?

Shop the market: The race from occupiers for high quality space has left secondary or tertiary spaces at risk of redundancy. Proactive landlords have invested accordingly and offer an opportunity. Spaces in these buildings, with well configured floor plates, can often boost operational efficiency and when coupled with attractive deal terms, can offer greater value to businesses. Financially and operationally speaking, there are some great deals around if you know where to find them.

Seek Advice: Seeking professional advice from an Agency who can research market conditions on your behalf to carry out the legwork and identify the best value options.

Taking appropriate advice will help to save time, navigate complex leases and secure more favourable terms.

Quality and value aren’t mutually exclusive, if you know where to look.

William Easterfield | 07923168020 | weasterfield@danielwatney.co.uk