interview: landlord opportunities
Today, we sat down with David Nurser, chairman at Francis Hunter Group, and Simon Collins, associate director at Francis Hunter Group, to discuss the company’s landlord work.
The Francis Hunter Group has previously worked with landlords, occupiers and developers. Why do you think the creation of a separate division is an important move?
David Nurser: In my previous roles, project work from landlords represented a significant part of the business so when I spoke to the directors of Francis Hunter, David Lunt and Matt Harris, I realised there was a huge opportunity there. They were doing great things with new build developers and incoming occupiers but the landlord work on existing buildings seemed to happen by chance. Appointing Simon Collins to head up this division allows us to be more proactive in our approach to landlords.
Where do you believe the opportunities lie?
Simon Collins: We believe the work will come from our existing clients – people we’re doing projects for are already asset managing other properties but they might not be aware of this part of our business. So much of this work is driven by great relationships which we already have with our occupier and developer clients. It’s a natural progression to then do landlord works within existing buildings.
In terms of the type of work within offices, our focus will be on common part refurbishments, Cat A refurbishment of vacant office space and external refurbishment of multi-occupied buildings. Landlord works to multi-occupied retail warehouse developments and industrial estates is also a potential market.
What changes in the industry have you seen over the last few years?
DN: Lease agreements have changed considerably in two key ways. Firstly, we’ve seen a huge reduction in the length of lease terms – gone are the days of 25 year leases, terms can now be as low as two years. Secondly, tenants are looking for ever greater flexibility. Over recent years, we’ve gone from 25 year leases with no break to five years with a break, say after two years, and a huge variety in between.
The advance of the co-working revolution has also taken short-term leases to the extreme and we have even seen one month co-working space contracts.
Most of this is being driven by tenants – they’re more savvy, better informed and better advised.
What impact will the rise in co-working have on Francis Hunter?
SC: Having recently been employed at WeWork, I know the potential of the co-working office space industry. It’s currently approximately 7% of the London market now and I estimate it will go to about 30% in five years’ time. A lot of that growth will come from landlords providing co-working space, either in unlet space in larger buildings or in standalone stock.
For us, the project management opportunities sit between the landlord and occupier market. We believe that our skills and knowledge from our existing work streams will be invaluable to serviced office providers.
What do you think is driving the growth in co-working?
SC: I think one of the main reasons behind the growth of co-working office space is the increase in the number of SMEs. I also see larger corporates exploring co-working spaces for their employees so it’s not just an option for small businesses anymore.
In addition, the popularity of agile and flexible working means companies are able to take a smaller space now.
It can also be more cost-effective, in the short-term, to lease a co-working office space.
On the flip side, this isn’t ideal for landlords. Without a reliable rental income and service charge contribution, any project work commissioned by the landlord needs to be under even greater scrutiny regarding value for money. We can support landlords with this too, through tendering, more effective procurement and value engineering.
Apart from the growth in co-working office space, are there any other interesting trends affecting the sector?
SC: For me the major trends are:
- The changing face of workplace styles
This has definitely affected the build specification. Current workplace design trends mean the traditional build base schemes with a suspended ceiling and lighting are being replaced with elements such as exposed ceilings and brick walls as well as more open plan and communal spaces. So the landlord needs to factor this in when preparing a building.
Technology has always been a factor but smart technology such as lighting e.g. corridor lighting going off, entrance systems via face recognition, motion and occupation monitors should be considered and can be used in the initial stage to help work out densities.
- The environment
This is a huge corporate issue and rightly so. Landlords, developers and occupiers can’t be seen to be wasteful. We know that one size doesn’t fit all but our experience from having worked with many occupiers means we have a pretty good idea on what tenants want so can help avoid that waste.
What are the key challenges that landlords are facing?
DN: The shorter term leases mean there is a much higher risk in the property being vacant. We will work with the landlord to reduce these voids. Our aim is to make the building flexible and marketable, and reduce the uncertainty that a short term lease gives.
That also benefits landlords as incoming tenants would typically have a rent-free period, which could be anything from six to 12 months, to allow them to undertake any necessary works. However if the building is already tailored to suit the tenant, then that rent-free period decreases.
SC: We work with landlords to help increase the value of their asset. In part, we can do that by looking to increase occupancy levels. Previously, buildings would be designed to accommodate one person for every 10 sq ft of space but our experience of enhancing base build systems means we could significantly increase the capacity of the building. We can examine ways to increase the net lettable area; for example, on a recent project, we relocated toilets in the basement and incorporated the former space into the office area.
Also, if a building is lacking in design, technology or does not go the extra mile for its tenants, it might soon start losing customers to newly opened spaces. We have the knowledge and experience to ensure that nothing is overlooked, and buildings are designed and delivered as ‘best in class’.
Why should landlords choose Francis Hunter?
DN: Our experience from having worked with both occupiers and developers means we have knowledge of the whole process from cradle to grave. We know what incoming tenants across many sectors will want and we are in an ideal position to help landlords save time and money by working with them to make the property more attractive to incoming tenants.
Also, having worked with occupiers, we’re used to working around existing tenants. Where asset managers have a floor coming free in an otherwise occupied building, we have the skill set and knowledge to refurbish that floor with minimum disruption to others within the building. Everyone wants a happy tenant!
We also have an in-house workspace design team, Maze, which is part of the Francis Hunter Group. This means we can offer clients a detail and build project, hopefully saving clients both time and money.
SC: An asset manager wants someone they have confidence in, a safe pair of hands they know will do the job to the agreed brief, on time and on budget.
With so many people involved in a project, it can be an onerous task controlling and appointing the relevant parties – the agent, the architect, the engineers, design companies etc etc.
By working with Francis Hunter, we manage the whole team and become the single point of contact for the landlord. The client benefits from our expertise and has peace of mind knowing we will deliver better outcomes for every project.