It’s not all shell-and-core in demand these days

As the Dubai office market starts to bottom out and softening capital values reflexively initiate exponential occupier demand, a salient challenge for landlords and owners persists — differentiation of their property in a commoditised office leasing market. The nuances of how to do this aren’t inherently obvious.

The conventional shell-and-core office faces increasingly indistinguishable homogeneity, influenced by an intensely dominant price sensitivity. Price point is a key factor of occupier decision-making, but is it dominant across all tenant profiles?

In the eyes of the corporate occupier maybe not. However, the SME market segment — representing the majority of transaction volumes (offices of 100-5,000 square feet) — occupier selection in grade B-C class buildings is predominately driven by price point.

Increasing competition of indistinguishable commercial property results in landlords lowering their price expectations to avoid the opportunity cost of unoccupied assets. As service charges and property taxes increase, paired with the loss of rental income, the costs associated with owning property can be prohibitively high.

Can an effective marketing strategy avoid the vulnerability of commoditisation?

The building location and amenities are not within the control of the landlord to change retrospectively. However interior space can be enhanced by design, adding value to the occupier and differentiating the property in a saturated market.

Peter Murphy from Spencer interiors, says: “Landlords can value add to their property and prospective tenants by offering space planning design and raised floors and ceilings (Category A), through to complete interior design and fit-out works.”

The leviathan of efficiency — antiquated traditional offices marred with monolithic executive suites — are becoming a relic of the CRE (commercial real estate) department’s operational strategy.

Is shared workspace the answer? Pioneered by American architect Frank Lloyd Wright in the 1950s (an advocate of organic architecture), sardine packed [open plan] spaces, compressed with optimum space planning efficiency are designed to coerce collisions of communication, promoting “collaboration”. These spaces are almost exclusively designed for extroversion.

Organisations need to understand that employees don’t always fall on either side of the introversion/ extroversion spectrum. In a paper by Block & Stokes, the authors found an increase in performance when the task was highly complex in a private setting vs. the benefits of social facilitation in a non-private space when simple tasks were assigned.

There is a distinct neutrality and grey area when it comes to personality in the workplace — human nature isn’t binary and our workplace design should accommodate this.

Thanks to advances in technology and corporate communications’ culture, employees can now work virtually and remotely from almost anywhere in the world. But do flexible work behavioural styles drive us towards obsolescence of the traditional office?

And does ubiquitous virtual communication paradoxically dehumanise our working lives, disconnecting us from our physical environment and permanently fusing us to a digital ecosystem?

Face-to-face interactions can dramatically improve decision-making speed and remove any contextual ambiguity, so it’s unlikely virtual communication will entirely replace the need for the physical work sphere. The open plan design allows cellular teams to share information quickly, improving efficiency of the decision-making process.

Teams in small sizes can benefit from proximity as instantaneous communication occurs in an open plan silo.

That being said, there are personality types who thrive away from the operational epicentres we call the conventional office. In a study by Bloom et al, CTrip, a Nasdaq listed travel agency, randomly assigned employees to either work from home or the office for nine months.

Researchers found a 13 per cent increase in employee performance, 9 per cent of which was due to increase in working hours (less attrition, commute time). Following the experiment results, CTrip rolled out the option to the entire 16,000+ strong firm, resulting in a take up rate of over 50 per cent and a 22 per cent increase in performance.

A creative director of an international marketing agency said: “When I need to concentrate on my work, I find the open plan office insufferable. I can tolerate my employees who are all generally nice people, I just can’t hear myself think in the congested, organised chaos of an open plan workspace.”

Work from home flexibility and earnest space planning bilaterally influence occupier choices and the effects of commoditisation. But what does this all mean for landlords? Should landlords invest in space planning design to increase the probability of minimising opportunity cost? The answer is probably yes.

According to Core Savills research, 72 per cent of occupier inquiry demand was for fitted space, at least to a standard of floor and ceiling. This results in 97 per cent of completed transactions as fitted office space rather than shell-and-core, indicating a clear demand for fitted space and reciprocally the investment by landlords to provide fitted offices.

The ability to occupy space immediately is a big advantage to occupiers, though landlords need to understand the evolving trend in workplace design that embraces productivity, engagement, retention and performance.

Source: Joel McQueen, Special to Gulf News

The writer is Director — DMCC Office at Core.


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