10 Trends for 2021
#4 Portfolio metamorphosis
We knew flex would be a hot topic in 2020, but it has quickly come to dominate office occupier thinking. A recent Avison Young survey of leading corporate occupiers identified three overwhelming priorities for real estate teams which suggest that a more flexible portfolio is a matter of necessity rather than choice.
First, talent attraction, and retention. Employees are demanding more choice over where and how they work. Most employees don’t want to work from home all the time, but they do value the flexibility they have started to enjoy. Almost all the respondent companies expect to adopt policies that will see a material shift toward home and remote working; “Work Near Home” (WNH) has entered common parlance.
Second, cost reduction. The COVID pandemic triggered the deepest, sharpest economic slowdown in history, dwarfing the impact of the Financial Crisis in 2008. Companies are looking to save costs wherever possible in the short term, and under-utilized real estate attracts immediate attention. Longer-term implications remain unclear, but more than 60% of respondents expect to see an overall reduction in their portfolio. In many cases this will involve a contraction – though not an eradication – of expensive city centre office space. Occupiers are looking to achieve the right balance of space to support their business, with the focus on total occupancy cost per employee rather than the specific cost per square foot of any particular facility.
Third, operational flexibility. The geopolitical and economic outlook appears highly uncertain for some time to come. Coupled with the need for cost containment, the speed of technological change and the desire to support a wider range of work styles, organizations are looking for flexibility allowing agility in responding to changing circumstances.
Traditional models of what type of space is needed, where it should be located and how it should be procured and managed are all up for discussion. Some organizations are considering going fully remote. Although this is likely to be the minority, it will be the right strategy for some.
Traditional “HQ” buildings with relatively structured occupancy and held on more conventional lease terms still have a part to play at the core of a larger corporate portfolio. But they will be a smaller component than they are today, sitting alongside a wider spectrum of options that companies will utilize according to their needs.
Central hubs serve a different intent to HQs. They are less a “warehouse of workers” and more like concierge spaces. A more fluid design provides spaces for collaboration and teamwork, onboarding, training and development, as well as client engagement. They are set up for a diverse level of remote work participation, connectivity, abundant meeting and social spaces, limited (if any) assigned seating and, ideally, enhanced building amenities. Hubs can then be supplemented with spoke locations to support WNH strategies which reduce employee commute times or allow staff to relocate to more affordable locations. A “hub & spoke” model offers huge benefits in supporting flexible working, mitigates environmental impact and can be financially advantageous. It is not without its challenges, however. A more decentralized workforce needs skillful management of individuals and teams, with a well-executed strategy to maintain the culture and identity of the organization.
The area where we will see most expansion in innovation is in flexible occupancy options that now exist. Characterizations of the flex debate as a binary choice between traditional leases and co-working were always too simplistic, and a range of alternative options already exist to meet the growing demand for greater choice and flexibility. Flexible solutions can also save an organization time and resources across many aspects of their real estate operations, reducing the number of employees needed for the delivery and operation of the space. Traditional landlords will be looking to tap into this growing demand given that conventional leasing demand is likely to be subdued, at least over the next few years.
t will take time for change to percolate through the market, as there are structural constraints on a shift to fully flexible models. Managing such a disparate and ever-changing portfolio will also be challenging; technology and embracing disruptive service delivery models will be key. We should be wary of over-stating the scale of change, given that major city centres have advantages and attractions for companies and employees alike. But many organizations report that they were investigating more radical options pre-COVID which were shelved for being too hard to implement. The pandemic has provided a ctrl-alt-del moment that doesn’t just allow occupiers to “think the unthinkable” but to see how it might be implemented. Expect to see more major occupiers seizing the opportunity to experiment with flexible models over the coming months and years. We’re Principal-led and owned; That means you partner with an empowered owner who is invested in your success for the long-term.
Israeli commercial real estate deals
BIG LTD is selling 2 commercial assets in US for $31 million.
These are the key ingredients of Israel’s rapid Covid-19 vaccine rollout recipe (Calcalist).
Commercial Real Estate Opportunities:
For sale 2,200M2 commercial building in Petah Tikva, in the center of Israel.
For sale two floors (2,300M2) out of five, in a comercial building in the center of Tel Aviv.
For Sale in Tel Aviv 600M2 floor, (one out of 4) + 13 parking spaces.
For lease, in Holon till 1,500M2 office space, high floors (flyer attached).
For lease, in Alon Tower Tel Aviv 156M2 office space, high floor, 5 rooms.
For lease, in Or Yehuda, 600M2 office space ready to occupy.
For lease, in Petah Tikva 1,700M2 office space ready to occupy.
For lease in Kadima, commercial units in a new neighborhood commercial center.
The purpose of this Newsletter is to update you with Commercial Real Estate information related to companies from Israel. The information contained herein does not constitute an opinion or professional advice. It is recommended to use the information detailed in this Newsletter only after consultation with the appropriate professional consultants from our office.
Propertech Real Estate is a commercial real estate boutique, a leader in providing professional and unique brokerage services for office spaces, logistics spaces, commercial buildings, brokering and negotiating investment real estate transactions, land, etc,
managed by Avi Gimpel and Guy Amosi.