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Tenant-Ready from Modus is a comprehensive programme developed for landlords and operators to create fitted-to-demand office space. Toby Benzecry, Founder and CEO of Modus, tells us more.
Tenant Ready is an umbrella term we created (and trademarked!) for providing office space that can be immediately occupied. Our customers are landlords, flex operators, serviced office and coworking businesses; indeed, any situation where a company seeks to offer pre-fitted space for tenants.
The Tenant Ready product is the design, construction and furnishing of plug-and-play office space, but can include marketing support, logistics, maintenance and finance. Tenant Ready differs from traditional, tenant-acquired Cat B fit out in that the space is often being created without knowing who the occupier will be, with an eye to several future occupiers.
To be successful, Tenant Ready space has to appeal to a broad market, be consistent in quality with the building and location, be configured to suit the types of enquiry in that area, hit the right price point and produce the right yield for our client! It also has to last – it will probably have several occupants and needs to be flexible, resilient and timeless. We work with our clients and their consultants to define what this recipe should be: often referring to demand patterns on property portals such as Hubble. There’s quite a lot of science behind optimising the proposition for each specific property asset.
Even pre-Covid, the demand patterns for office space were changing and it was becoming increasingly apparent that tenants want a much more flexible relationship with their landlords – and definitely do not want to deploy their own capital when fitting out their offices. The increase in demand for our Tenant Ready services stems directly from this change in the market.
In fact, Modus has been providing Tenant Ready space through our serviced office clients for over two decades. In recent years the market has expanded almost exponentially with the growth of coworking, the entry of flex operators such as Knotel, and introduction of landlord offerings such as British Land’s Storey. Because of the level of demand for these products we decided to create a specialist team, and last year we came up with the Tenant Ready name to describe these services.
I don’t really like the term Cat A plus – they really mean ‘Cat B paid for by the landlord’. Tenant Ready is a broader approach that recognises that the pre-fitting of the space might be carried out by a number of different parties – not just the landlord – and that success comes from renting quickly for the right price, with longevity and minimal future voids. This is a much more sophisticated approach that calls on all our experience, expertise and resources to assist our clients in defining, creating and marketing their product.
This trend started long before Covid, but if we have learned anything over the last few months it’s that corporates require flexibility from their real estate – because predicting the future is impossible, and maintaining agility is essential. In a few years it will seem bizarre that tenants would be expected to commit to a space for long periods and procure their own fit outs – rather like showing up at a hotel and being told to provide your own bed. There will always be those companies who want to have the surety of their own buildings, but for many, if not most, the future is capital-light and flexible.
In a few years it will seem bizarre that tenants would be expected to commit to a space for long periods and procure their own fit outs – rather like showing up at a hotel and being told to provide your own bed.
D&B companies have traditionally focused their attention on tenants because they have been our customers. Whilst the tenant market will always exist to some extent, the procurement of Cat B fit out will increasingly be by others, and D&B will have to adapt itself to this new normal. Not everyone will survive because the businesses paying for these fit outs are typically professional buyers and expect scale economies; they’re happy to deal with companies like Modus and have confidence in our abilities, but the plethora of smaller operators in the D&B world may struggle.
Covid has increased the need for flexibility and this won’t go away. We have empirical evidence that companies are already exiting traditional leases and moving to more flexible arrangements directly in response to the pandemic.
However, whilst there is much talk in the media about the reluctance of companies to return to the office, we believe that in the long run corporates will recognise the role that physical space plays in their businesses and will want their people – at least periodically – to congregate in buildings.
The alternative is unpalatable: the death of all the small urban businesses that rely on commuters, huge damage to the commercial property industry, the relocation of hundreds of thousands of jobs to lower cost regions (including overseas), the loss of corporate identity, the cessation of knowledge transfer in the workplace.
We strongly believe that businesses will rediscover competitive advantage through the collaboration of their people in physical workplaces and that those companies who choose to be forever online – except in some niche cases – will simply fade away. But commuting simply to use a desk is clearly a thing of the past. Offices will need to offer much more and be focused on facilitating the activities that don’t work well remotely; pretty much anything to do with collaboration.
Our challenge is to define what these new, ultra-flexible offices will look like, and to develop commercial real estate products that will work in a post-Covid world.
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