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65% of firms plan to stabilise or grow their office portfolio within three years

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International businesses are looking to their workplaces to revitalise corporate brand and culture after the pandemic, which will see significantly improved amenities and services available for employees, according to the latest research from Knight Frank. Despite over a year of restricted access to offices, businesses continue to identify their workplaces as an essential component of their corporate identity and vital for retaining and reinvigorating employees post-pandemic. 90% of global occupiers surveyed by Knight Frank said that real estate is a strategic device for their business. 49% of firms named ‘corporate brand and image’ as the top strategic priority fulfilled by their real estate, while offices are also increasingly seen as a tool for improving employee wellbeing, collaboration, and talent attraction and retention, with each of these categories referenced by 37% of firms.

 

The need to improve office amenities or adjust workplace strategies will see up to one in four firms relocate their corporate headquarters after the pandemic. 38% of firms said it is either likely, very likely or definite that they will relocate their corporate headquarters (HQ) within the next three years, setting the scene for significant activity in the office market and competition for the highest quality and best-located space in the coming years. There will be a flight to quality space, with 92% of firms planning to increase or retain the same level of quality in their offices. Many businesses are also planning to increase their use of offices to support their growth ambitions beyond the pandemic, with 30% of firms looking to increase their total office space within the next three years. In total, 65% of firms plan to grow or stabilise their current level of space.

 

Tech firms are set to be the biggest drivers of demand for office space, with 39% of the global occupiers anticipating an increase in the size of their global footprint over the next three years identifying as Technology, Media & Telecommunications (TMT) businesses. Tellingly, of those, 70% are planning to increase their global footprint by more than 10% of their existing size.

 

William Beardmore-Gray, Global Head of Occupier Services and Commercial Agency at Knight Frank, commented: “There is a mood of change in the air. Global firms are looking beyond the pandemic and are focused on how their workplaces can enhance corporate culture and re-engage employees in a new age of agile working. We are seeing a re-familiarisation with the office beginning in many big cities around the world. Firms want to give employees the best of both worlds, allowing them to work flexibly, but making their offices the best possible experience, which means delivering higher quality and more engaging workplaces.”

 

Firms will embrace a new era of agile working by enhancing their corporate offices, not abandoning them. Over the next three years, 47% of firms will seek to improve the quality of the space they occupy, with 46% looking to improve the amenities available to employees within the workplace. 55% of respondents said they will create more collaborative spaces within their offices and 54% said they will implement desk-sharing or ‘hot desking’ over the same period, despite Covid-19 having largely prevented desk-sharing over the past year. Of the amenities, occupiers will look to bring to their workplaces post-pandemic, dedicated mental health facilities and click and collect services have risen into the top five priorities, whilst amenities supporting wellbeing dominate the list:

  1. On-site food and beverage (65%)
  2. Gym facilities (47%)
  3. Cycle storage (46%)
  4. Mental health facilities, such as sanctuary spaces (45%)
  5. Click and collect facilities (45%)

 

Occupiers’ biggest frustrations with their landlords are a lack of flexibility (29%) and a lack of innovation in product or service offering (21%), highlighting the need for landlords to invest in operations, property management and tenant services. Encouragingly, 60% of respondents said they had seen an increase or significant increase in communication with their landlord over the course of the pandemic, providing an opportunity for landlords and tenants to develop a more collaborative and partnership-orientated relationship for the long term.

 

William Beardmore-Gray added: “Half of all firms are already planning to reconfigure their real estate portfolios and remodel their workplaces over the next three years to ensure they are providing employees, colleagues and potential new talent with the best spaces to work, learn and thrive. Businesses will gravitate towards offices that offer a more dynamic work environment and experience, utilise technology and reduce environmental impact.”

 

Dr Lee Elliott, Head of Global Occupier Research at Knight Frank, commented: “The experience of the past year has focused minds on what offices deliver for firms, and what employees most value in the workplace. Real estate is increasingly seen as a strategic tool for meeting corporate objectives, from brand identity and talent attraction to employee wellbeing and achieving Net Zero Carbon or wider sustainability targets. Well-designed offices can boost productivity, creativity, and a firm’s ability to attract and onboard talent especially graduates. However, the traditional corporate headquarters will need to adapt to serve new purposes and deliver more services or amenities to employees, with the largest firms putting a higher value on the health, safety and wellbeing of their people.”

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Could equity release be used to help more younger homebuyers?

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Younger first-time buyers could be given more financial help from the Bank of Grandma and Grandad, through the use of improved equity release products, a new report suggests.

The document written by Tom McPhail, of consultancy The Lang Cat, claimed that younger buyers are missing out because older members of their family are unable to satisfactorily tap into their property wealth.

Mr McPhail said: ‘Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations.

‘An equity release by grandparents of say £20,000 now, could be transformational for a 20 something struggling to raise a deposit and get on the housing ladder but would make only a very modest dent to the value of the grandparent’s house.’

Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations, says new report

Releasing some of the equity in a property means older homeowners can choose when and how they share their wealth with younger generations, says new report

The report acknowledged that equity release has endured a poor reputation in the past after customers suffered ‘severe’ financial knocks.

The sector has been criticised for encouraging people to take on debt, particularly later on in life.

There has also been other concerns about equity release, such as customers falling into negative equity where the value of a property is less than the loan taken out against it when house prices fall.

The report suggested that while the equity release sector has since begun to put ‘its house in order’, it is ‘still not perfect’ and some regulatory safeguards need to be strengthened.

It called for several issues to be looked at, including early redemption charges on equity release products.

It said that most providers apply a simple sliding scale of charges, for example 10 per cent in year on to 1 per cent in year 10.

However, it claimed that some providers apply an early redemption charge based on prevailing gilt rates at that time, putting customers at an ‘unfair disadvantage’.

This is because the fees are not transparent as there is no way a customer can know in advance whether they’d be liable for a charge and if so, how much. 

In the past, customers have also fallen foul of the small print on their equity release loans when it comes to early-redemption penalties – such as couples who must pay an exit fee unless both of them need to go into care.

The report also raised questions about interest rates on equity release products. It said providers should be consistent with their lending criteria and not move the goalposts after customers have taken out a loan, as this can make it harder for them to access a top-up loan in the future, potentially forcing them to remortgage. 

Equity release products could help people access their property wealth to help younger members of their family onto the property ladder

Equity release products could help people access their property wealth to help younger members of their family onto the property ladder

The report argued that equity release products could help people access their property wealth to help younger members of their family onto the property ladder.

Mr McPhail added: ‘Raising a deposit has become an increasingly significant barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations.

‘Releasing some of the equity in a property allows older homeowners to choose when and how they share their wealth with the younger generation.

‘This more targeted approach gives them greater control to use their assets to the maximum benefit at the point of need.’

Raising a deposit is a barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations, says the report's author Tom McPhail

Raising a deposit is a barrier to getting on the housing ladder, with increasing numbers of first-time buyers having to rely on financial help from older generations, says the report’s author Tom McPhail

Equity release: How it works and advice

To help readers considering equity release, This is Money has partnered with Age Partnership+, independent advisers who specialise in retirement mortgages and equity release. 

Age Partnership+ compares deals across the whole of the market and their advisers can help you work out whether equity release is right for you – or whether there are better options, such as downsizing. 

Age Partnership+ advisers can also see if those with existing equity release deals can save money by switching. 

You can compare equity release rates and work out how much you could potentially borrow with This is Money’s new calculator powered by broker Age Partnership+.* 

 * Partner link

Jonathan Harris, of mortgage broker Forensic Property Finance, said: ‘Equity release has historically been viewed as a ‘murky’, high-risk sector, fuelled by minimal regulation, poorly-qualified advisers, only a handful of lenders and extortionately high interest rates.

‘Fast forward to today and we see a dramatically transformed sector, benefiting from strict regulation, highly-qualified advisers, multiple lenders and access to very competitive interest rates. 

‘Not surprisingly, equity release is now a viable and growing market for older borrowers looking to utilise the gains seen on property prices to bolster lifestyles, as well as pass on wealth to children when they need it.

‘Those considering equity release should make sure they understand the implications and involve family in any decision-making. It is always important to seek advice from suitably-qualified advisers.’

It comes as a separate report by Legal & General suggested that one in every £90 spent by retired Britons is funded by equity release.

It said that equity release funded an estimated £3billion in retirement spending last year, although it didn’t mentioned the money going to younger generations towards buying a property.

Instead, the report’s survey of 2,000 homeowners found that those with equity release have most frequently used the product to finance home improvements, at 26 per cent.

It said equity release is also being used to support costs such as medical expenses at 17 per cent, maintaining living standards in retirement at 16 per cent, and paying off personal debt at 16 per cent, for example paying off interest-only mortgages. 

It suggested that equity release is likely to play an increasingly important role in financing care-related expenses, with 19 per cent of prospective homeowners citing it as a consideration.

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Allianz Real Estate buys prime office building in Rome (IT)

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Allianz Real Estate, advised by Dils, has acquired an office property in the centre of Rome. The transaction, worth circa €175m, is one of the most important to have been carried out on the real estate market in Rome in recent years.

 

The building, consisting of eleven storeys, comprising nine above-ground and two underground, has a gross lettable area of circa 22,000m² and has undergone a major refurbishment, offering the highest environmental sustainability and energy efficiency standards (LEED Gold Certification). The strategic location, between the CBD and Termini Station, is enjoying great success, especially among corporate occupiers. 

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NCC sells Valby office scheme (DK)

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NCC is selling Kontorværket 1 office project in Valby, Copenhagen to Industriens Pension. The building will become biotech company Genmab’s new headquarters and will meet high environmental standards for both the building and the area. The transaction will be conducted as a company divestment, based on an underlying property value of approximately €81.9m (SEK875m). Transfer of the project and payment of the purchase consideration is expected to result in a positive earnings effect in the NCC Property Development business area in the first quarter of 2023.

 

“We are now selling Kontorværket 1, the first phase of our development project in Valby in the central parts of Copenhagen. Here we have developed property with an optimal infrastructure and appealing architecture, and I am pleased that Industriens Pension is now taking over,” said Joachim Holmberg, Business Area Manager, NCC Property Development.

 

Kontorværket 1 encompasses 16,000m² of lettable area and also includes a basement featuring a parking garage next to the building, with space for 280 vehicles and facilities for parking bicycles.

 

“This is an attractive and future-proof office property, located in an area with very good infrastructure, a motorway, a nearby metro and S-train station. The 15-year lease with Genmab fits well with our strategy as a long-term owner, and we expect the property to contribute a stable return for our members for many years to come. We look forward to welcoming Genmab’s experts in biotechnology,” said Soren Tang Kristensen, Head of Real Estate Investments, Industriens Pension.

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