There are large differences in reported levels of satisfaction with asset services, between companies that had renewed leases, or intended to, and those that had moved or planned to.
CBRE conducted a comprehensive survey of 500 occupiers earlier this year. This study found particularly large issues on certain aspects relating to the physical building and its management - including processes for reporting faults and giving notice of works, as well as provision of elevators and climate control. A key finding of the survey was that occupiers' experience of these factors, taken together, may push them towards a "tipping point" that leads to relocation, even where they are broadly satisfied with other aspects of the location.
These issues are likely to affect occupier thinking and behaviour irrespective of the stage of the cycle, and it is vital for investors and service providers to appreciate those items to which occupiers are most sensitive. Since landlord-tenant relationships are increasingly multi-locational and multi-market, this appreciation needs to be widespread. Office occupiers react to a wide range of different factors in selecting locations and buildings. Similarly, once in place, there is a variety of things that affects their operational efficiency, level of overall satisfaction and inclination to remain there or move. One of these is the provision of asset services relating to the building. With commercial leases generally getting shorter, break clauses more common and occupiers more attuned to aligning their real estate strategy with wider corporate goals, the need to support asset performance through the management of income and occupancy is critical.
Our study looked at the specific role of asset services in this process, identifies which elements of asset services resonate most with occupiers and show the highest degree of association with their intentions to "stay or not to stay". From a landlord, and service provider's perspective, distinguishing the elements of asset services that most affect occupiers' thinking and decision-making is clearly helpful. At a minimum it should help in refining the service offer to optimise its impact on income and value.
Given the number of locational factors involved, and the cost and upheaval associated with moving offices, it's not surprising that companies only do so infrequently. Of the 500 companies surveyed, only 12pc had moved the last time their lease expired. Nearly 60pc reported that they would renew in situ if faced with a stay/go decision today, and an even higher proportion for small companies.
Where occupiers do decide to move, it is usually linked to some aspect of their existing space. Of those who had moved premises within the last two years, nearly two-thirds had changed their footprint, with 50pc expanding. However, it is not merely an issue of companies outgrowing their existing space. The survey highlighted significant differences between prospective movers and would-be renewers in the levels of satisfaction they expressed about various aspects of office management or asset services. This doesn't necessarily mean that these differences are causal, but the size of the differences does suggest that these factors are playing a role in stay/go decisions.
Specifically, maintenance & cleaning and building management recorded satisfaction ratings nearly 10pc lower for movers than for renewers, while for physical building facilities the difference is 8.3pc and for commercial management 7.25pc. It is also notable that the overall satisfaction levels expressed for these factors, by movers and renewers alike, are generally lower than they are for fixed locational factors, such as labour , infrastructure and rent costs.
Technical services is regarded as marginally the more important than commercial services by tenants. Within the range of technical services, those attracting the highest importance were premises security and safe/clean works. It might be tempting to think that focusing on these two factors would be the most effective way to retain tenants and protect income. However the big differences lie elsewhere and in all cases prospective movers report lower levels of satisfaction than prospective renewers.
By some margin the largest difference between prospective movers and renewers relates to a "clear and responsive service for reporting faults". The other major differences concern sufficient reliable elevators and climate control. There are certain technical elements which occupiers attach very high levels of importance; and which may nudge them towards a "tipping point", even when broadly satisfied with the location.
As for commercial services, these attracted far lower and more uniform importance ratings than technical services. They also showed generally high satisfaction scores. The most important elements were reported as "service charge is clearly constituted and has no hidden charges" and "accurate communications and rent demands".
Overall, this set of results suggests a lower level of importance attached to commercial services. They are broadly seen as "hygiene" factors that enjoy high levels of satisfaction and little differentiation between renewers and movers. The only real distinction drawn was on different location types: tenants on business parks reported far lower levels of satisfaction on commercial services than those in other locations.
Typically landlords have asked service providers to trim costs in order to keep service charges down. With the growing need to attract staff by any means possible, this is often being reversed in recognition of the increased importance of labour. As this survey has demonstrated, lifts, climate and access are among the more critical technical services in supporting this agenda.
We are also seeing changes to the traditional recourses of dissatisfied tenants. Occupiers have always been able to club together if unsatisfied with services, first to the managing agent, then if necessary to the landlord. With social media now widely used, , there are more immediate - and less controlled - means of communication available.
This also means that the findings, and the actions associated with them, cannot easily be dismissed as a function of the cycle. New development has been subdued in most European markets and occupiers' choice of Class A buildings has narrowed as a result.
However the fact those occupiers' currently have limited alternative location choices shouldn't be taken as justification for substandard service.
There is a wider context to this with two major elements. Firstly occupiers are more sensitive to the needs of the labour force in selecting and managing buildings; and secondly, landlord-tenant relationships are increasingly multi-locational and multi-market arrangements. In this environment, there are no "nice to haves" any more. Everything is essential and the building has to work regardless of cyclical conditions.
Edward Smyth is Director, Asset Services for CBRE