Nearly 90% of UK commercial real estate leaders have seen a dramatic surge in tenant expectations over the last few years. Today’s tenants demand more than just office space; they want smart, sustainable environments that can adapt to their evolving business needs. Landlords who fail to meet these requirements risk being left with depreciating properties and empty portfolios.
This is according to LMG’s latest research report — Smart Moves — which concluded that the fundamental shift in landlord-tenant relationships triggered by the pandemic continues to reshape the industry today.
The report found that flexibility has become non-negotiable, with almost half (46%) of property owners reporting an increase in demand for versatile work environments. The rigid, long-term leases of the past are being replaced with shorter, more agile agreements that allow tenants the freedom to navigate an uncertain future.
As these expectations shift, landlords must rethink how they interact with tenants at every touchpoint – from the moment they enter the building to their experience within the office. Dubbed from ‘street to seat’, this transition to a more integrated, tenant-focused approach is changing what it means to generate value in commercial real estate.
Meeting demand with social and green lease solutions
In response to these changes, non-traditional lease types are gaining traction. Four in ten (42%) landlords are already implementing ‘social value leases’, which include commitments to support community well-being and social impact. While more than a third (36%) are adopting ‘green leases’ to encourage sustainable building practices and environmental accountability.
In addition, to stay ahead of the curve and provide occupants with a better experience, landlords are concentrating on optimising the whole tenant journey —
from street to seat — to ensure their properties remain relevant in today’s rapidly changing market.
“UK commercial real estate has reached breaking point,” said Mike Hook, Executive Director, LMG. “The profound shifts triggered by the pandemic have now fully taken hold, rendering the market completely unrecognisable from five years ago. As we come to the end of 2024—a year of belt-tightening pessimism where downsizing radically outpaced expansion—the pressure on landlords has reached crisis level.”
Technology is critical to building the future
Property owners agree that the future of their business is closely linked to smart technology, with 92% already planning to invest in smart tech this year. Over a third of property owners (34%) report growing demand for high-tech, smart buildings as the standard, while 30% are seeing a surge in requests for smart, collaborative spaces aimed at boosting employee productivity, health and wellbeing.
This creates a valuable opportunity for property owners. Smart technology can revitalise outdated or underutilised areas by cutting operational costs by 20-30%, improving energy efficiency, and delivering the seamless, eco-friendly experience today’s tenants require.
As tenants’ demands evolve, landlords must focus on offering more than just smart interiors. A ‘street to seat’ approach—where every aspect of the tenant’s experience is optimised through smart technology—will be crucial for businesses seeking to remain competitive in an increasingly demanding market.
“I believe that this next stage for commercial real estate holds immense potential for those ready to raise the bar on their service offerings,” said Mike. “But the clock is ticking. Reach out and explore how we can help your organisation seize these opportunities while the time is right.”