The pandemic has changed the relationship between the providers and consumers of office space, accelerating trends that were already becoming apparent. Occupiers are likely to demand more flexibility when their future requirements for office space are changing rapidly. Are the existing legal structures fit for purpose?
Participants in the roundtable agreed that more transparency is needed all round: tenants want a partnership with the landlord, which in some cases is still not happening. One major occupier is now insisting that leases provide tenants the right to tap into the landlord’s BMS system. But, on the other hand, are occupiers willing to share data on occupancy levels and building performance with their landlord? Such transparency is still rare, but respondents felt generally occupiers would take part provided they could understand why data is being requested, and why it is needed. Similarly managing agents need to communicate frequently and ask how they can help.
These were all trends that were developing before the pandemic struck. In addition, COVID-19 has highlighted some specific issues that will need to be resolved as part of the recovery process. For example, even though many office buildings have been largely unoccupied, services and facilities within a building are essential, so keeping these running even when occupancy is low is important.
Occupiers need to communicate with their landlord about what they want on returning and they should begin a ‘re-boarding’ process for existing staff in advance of their return to the office. Managing agents are creating asset registers to assess the readiness of a building for a return to the office. They need to be more transparent about the cost implications of preparing a building for post-COVID-19 life: what technology requires upgrading? What is being done to improve a building’s carbon footprint and the wellbeing of staff on-site? Service charges are likely to change in response to some of these changes.
With safety in the office at the forefront of everyone’s mind, what can employers and managing agents do to provide reassurance? A facilities manager highlighted the particular challenges around the testing of people coming into buildings and concerns over liability on the part of managing agents, owners and facilities managers for the accuracy of these tests and around the confidentiality of results. In terms of longer-term legal structures, the market has been through a period of severe disruption, and it will take a while for new industry standards to emerge.
Occupiers are continuing to request pandemic clauses in new leases that could mandate rent-free periods in the event of future lockdowns, but landlords are still holding firm on this. Will this begin to change as landlords seek new ways to attract occupiers back to the office? Similarly, dilapidations clauses also need an update. Is it really sustainable to require tenants to strip out offices when they vacate? A financial contribution might be more appropriate and leaving a fitted space may now be more beneficial to a landlord.