Rental costs take second place to keeping staff |
By JIM DOW
OFFICE occupiers are much less concerned about the rents they have to
pay than they are about staff retention.
That, says Stewart Taylor, is a big change from five years ago.
Taylor is director in charge of the CBRE business space agency and
development team in Edinburgh. He previously worked in agency positions
in London and Germany and for the last 12 years has been based in
Scotland, where his clients include the NHS, Grosvenor Developments,
Gladedale Capital and Scottish & Newcastle.
He says that what occupiers now want is to have the right people in what
they regard as the right location.
He continues: “Staff retention is the issue. There is an employment war
in certain sectors and they have to provide the best environment for
staff to keep them and property costs are a relatively small percentage
of the overall costs to get the right people.
“It is not just about getting the right amount of space but getting a
building which projects the right profile.
"When I came to Edinburgh 12 years ago what I found was that Scottish
occupiers were reluctant to be in a place which stood out. They did not
want people to see them in expensive buildings.”
That, he says, has changed. Occupiers have accepted that people don’t
judge them by the
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Stewart Taylor: 'Staff retention is the issue'
building they are in – they have to project a professional image. That
is why staff retention is now a big issue.
He goes on: “Of course, they do not want to overpay a rent but they make
decisions which are based on the environment in which their staff will
work and not on whether or not they will pay an extra 50p a foot rent.
“With the way yields are going and the fact that building costs are
going through the roof developers will have to achieve higher rentals
otherwise it does not stack up any more.”
Another change Taylor has identified is the attitude to what might be
regarded as secondary locations – places like Quartermile, Springside
and the nascent Tanfield. No more. He says on, for example, Quartermile:
“From the outset we knew it was a challenge and the marketing was set up
to tackle that head-on.
“Now we have achieved rental levels which compare with The Exchange,
which is the benchmark for what is a prime location.”
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| Not all bad news from retail front
By Edward Marr
WHERE overheads are considered to be manageable or where risks are low,
competition is still driving rents up, albeit slowly and sporadically,
according to the Midsummer Retail Report by Colliers CRE.
However, "the increase in turnover only and base and turnover lease
deals will continue as landlords fight to secure the acquisitive
retailers. Flexibility is key for tenants and we are perhaps seeing the
early signs of a sea change in UK lease agreements, to one that is more
in tune with the European markets.”
Despite much caution, deals are still being agreed and some locations
are also still seeing rental growth.
Even more encouragingly, some are now seeking to expand again.
Chris Humphrey, associate director, out of town retail, Scotland, says
that retailers are constantly striving to cut their property costs and
size requirements are being squeezed, with optimum size units now being
5-7,000 sq ft for most retailers.
He goes on: “This is particularly apparent where a trading mezzanine can
be installed, reducing the need for as much ground floor sales space and
thereby reducing rent liability.
”We are seeing retailers taking advantage of the current planning
situation in Scotland where planning consent is not required for a
mezzanine although this loophole will close in November.”
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