Only one in ten companies relocate upon lease expiry
The impact of property management on lease extensions
The vast majority of companies choose to remain in situ upon commercial lease expiry, with the management of property a significant factor in office location decisions, according to new ‘Stay or Not to Stay’ market analysis from global real estate advisor CBRE.
The survey analysed 500 companies in the UK and Netherlands to understand the factors surrounding occupier behaviour when ‘stay or go’ property decisions are being evaluated. Of those companies surveyed, just 12% moved the last time their lease expired and of those who had moved premises nearly two-thirds had changed their footprint, with 50% expanding.
A core part of the ‘stay or go’ decision-making process centres on the management of an asset in terms of the quality of the technical (related to the physical fabric of a building) and commercial services (relationship between occupier and service provider) provided.
Of the two, technical services were deemed marginally more important. The survey findings cite that occupier satisfaction ratings are 10% lower for movers versus renewers with respect to maintenance and cleaning of a building. In addition, for overall building facilities management the difference is 8.3% compared to 7.25% for commercial services.
The clearest difference in satisfaction levels between prospective movers and renewers relates to the following technical service features (see also figure 1):
Clear and responsive service for reporting faults
Sufficient and reliable lifts
Clear communications and adequate notice for works
Sufficient, quiet and reliable climate control
The findings show that effective and efficient property management has a clear bearing on occupier satisfaction. Its role is crucial in the overall management of an asset. If the management of a building is deemed inadequate it is a ‘tipping point’ for occupier moves despite associated costs and upheaval. This is particularly true for technical services satisfaction related to building fabric management, irrespective of other factors.
Furthermore, on average commercial leases are getting shorter with break clauses increasingly common. It means that occupiers are more engaged with their real estate strategy with reference to wider corporate goals. For this reason the property management industry has to work even harder to meet occupier expectations and work with investors to ensure sufficient investment is in place to secure tenants long term and provide income security for buildings.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.