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The introduction of more flexible lease terms within the structure of commercial leases in the UK generates a number of challenging issues for investors, occupiers and their advisers. This emerging structural change requires a new approach to the management and pricing of commercial real estate. This paper examines the factors underpinning the desire for greater corporate agility, including business planning and risk management; globalisation; and existing and proposed changes to accountancy standards. In addition, the paper considers innovation in the supply of space and the substance of space contracts. It is the contention of this research that it is possible for all parties to derive equal utility from greater flexibility by matching occupier and investor requirements. However, any attempt to price the risk reallocation rationally must encapsulate the likelihood of experiencing greater income volatility as well as the probability of a break clause being exercised or, more specifically, the risk of experiencing costs associated with voids and re‐letting.

It can be argued that the property valuation profession has historically relied upon uniformity as the basis of all capital and rental valuations. Within each property sector, differences in location and design were secondary to the underlying fundamental that the lease contracts for the properties were the same. During the 1980s most leases, in all sectors, were of 25‐year duration with the tenant being responsible for all outgoings. In the early 1990s the lease length reduced but most other terms remained constant. Rental valuation could therefore be made by direct comparison on a pro‐rata basis. Similarly, capital valuation would be made either by direct capital comparison, or by reference to a comparable rent and yield to determine the capital value by the investment method. Comparison was still the principal tool of analysis and this relied upon uniformity of leases within the market. In the late 1990s, the business environment experienced substantial structural change and tenants began to demand bespoke leases to suit their particular requirements. This has led to a plethora of different lease contracts, as tenants require shorter leases, the ability to expand and contract, break clauses and upwards/downwards rent reviews. The market is now as diverse as it was uniform in the 1980s. However, as pricing models relied upon comparison, valuers were reluctant to accept tenants’ new demands for flexibility as it was difficult to price these new contracts. This paper reviews the change in market conditions and equates the new requirements of the tenants with an increase in the uncertainty in the market. It argues that this uncertainty can be built into pricing models using probability‐based models and provides a scenario analysis to price a flexible lease contract.

With strategies including flexible work practices, tenants are increasingly seeking flexibility in their physical office space and layouts. The purpose of this paper is to examine to what extent investors address tenants’ changing demand for office space with reference to layouts in new and existing office buildings.

A qualitative study comprising in-depth individual interviews with senior portfolio managers of all listed property trusts investing in the office sector in New Zealand was undertaken.

The findings confirmed property investors incorporate several adaptive and flexible space design and specifications in their modern office buildings to enhance space flexibility and functional efficiency. These include adaptive building structures, efficient floor plates, flexible building services, advanced IT networking, high-quality building amenities and modern building materials. Building structures and layouts are designed to be modified quickly and cost effectively to address tenants’ changing needs. Implications affecting tenant demand for flexible spaces on their lease contracts were also identified.

The findings from this research have implications for management of office space. Although the data were sourced with reference to buildings located in New Zealand only, the findings are applicable to office buildings in other countries.

The study provides an insight into design strategies adopted in modern office buildings to enhance space flexibility and functional efficiency. These findings are of practical application to professionals involved in the design, development, investment and valuation of modern office buildings.

The paper provides in-depth insights into how investors meet tenants’ changing demand for physical space which is linked to delivering improved and stable market-driven returns to investors.

The own versus lease decision is a surprisingly controversial topic. Although the issues driving the decision appear straightforward, they are interpreted differently, leading corporations to make opposite decisions in similar circumstances. Overall, however, the author’s experience is that the current trend is away from ownership. In the slower‐moving decades of the past, corporations chose to own their real estate to keep control of their place of work. These buildings were often constructed specifically for their use and were as much image statements as places of work. Today, the pendulum of popular opinion has swung to the other extreme. In an era where asset metrics such as EVA (Economic Value Add) and ROA (Return on Assets) are in vogue, it is no longer acceptable for corporations to invest funds in capital‐intensive assets that are not central to the company’s business. Under the banner of flexibility and better asset utilisation, many companies have adopted a ‘lease only’ policy and refuse to own any building, even their corporate headquarters. Unfortunately, it’s not that simple. Although easy to follow and implement, simple rules such as ‘own everything’ or ‘lease everything’ don’t work. Each decision needs to be assessed against a number of criteria which determine the relative advantages of leasing or owning in a given situation. It is an environment in which many myths have emerged. The following paper outlines many of the issues involved in own v lease decisions and reviews some of these myths. By providing a framework for making the decision, it asserts that, as with most major business decisions, there is no getting away from the need for an intelligent analyst.

Complicated leasing terms make both the valuation of lease contracts and the calculation of effective rent levels difficult. These complications are compounded by the existence of option‐like features in many contracts. For example, retail leases in the USA generally have overage rent clauses that allow the landlord additional rent if sales exceed a breakpoint, but set a minimum rent level under any sales conditions. Similarly, upward‐only rent review clauses are common in the UK and Australia (as well as other commonwealth countries). Here the rent is fixed at the commencement of the contract, with the option to review the rental figure in line with market conditions at pre‐determined intervals (normally every five years). If rents in the market have increased over the interim period, the rent of the subject property will be adjusted upwards accordingly and this higher level becomes the minimum possible future rent. However, if market rents have either remained static or decreased, the landlords would choose not to operate the rent review clause and the existing rent will continue. The US overage contract can be valued using a binomial approach. The upward‐only adjusting leases cannot because the value of the option is “path‐dependent”. Here, Monte Carlo valuation methods must be used. In this paper we describe both approaches. We show the relationship between the rents on these contracts relative to those without overage or with up and downward adjustment. The key determinants in establishing this relationship are the expected drift and the volatility of either sales (in the case of overage) or market rents (in the case of upward‐only leases).

The purpose of this paper is to address the knowledge gap by analysing the motivations of driving both users and hosts to the co-working space in Kuala Lumpur, Malaysia as the motives of co-working space is related to how well that space supports their needs.

By using a mixed-methods approach, users’ and hosts’ behaviours were studied through the survey and in-depth interview, where 60 users were interviewed, as well as six operators of co-working space and two real estate market experts.

Based on the results, convenient location, open space layout and ambiance, shared facilities, membership costs, flexible leases and knowledge sharing are the main motives that drive users to the co-working space and these motives are significantly related to user satisfaction. The results also showed that the users’ motives for working in the co-working space differ mostly from hosts in terms of service attributes.

The co-working space is more than just an office alternative but is a service-oriented real estate business. By providing the appropriate combination of attributes to succeed financially, co-workspace providers can support most of their members’ tasks, which leads to member satisfaction.

Research on the co-working place is still inadequate, particularly in Malaysia. Greater knowledge of attributes that influence users’ and hosts’ responses could lead to a better understanding and prediction in determining their needs and preferences.

Much like their residential counterparts, commercial leases have a reputation problem. Although often derided as painfully dull and mundane documents, residential leases have begun to be interrogated by socio-legal scholarship with renewed interest. This paper aims to continue this line of work in the commercial context through a detailed examination of a widespread form of leasehold in the pub sector: the “tied lease”.

The paper draws on interviews with 14 publicans and archival research.

The author argues that the lease is a decisive actor in determining the balance of power between publicans and pub-owning companies and shaping the physical environment of pubs in the UK.

The author’s broader agenda is to argue that socio-legal scholars’ renewed interest in leases should not be confined to the residential context: commercial leases warrant far greater socio-legal scholarly attention.

With the plea that industry does not generate enough net profit to reinvest has come a marked growth in leasing. Here we examine the background and advantages of this type of financing.

Corporate occupiers require offices and services which meet their business needs, while landlords must attract and retain occupiers to maximise occupancy and rental income. The purpose of this paper is to help landlords and property managers understand what aspects of property management matter most to corporate occupiers, so that they can achieve a mutually beneficial relationship.

This paper analyses interviews with 1,334 office tenants in the UK, conducted over an 11-year period, to investigate determinants of occupier satisfaction, loyalty and advocacy. Structural equation modelling and regressions are performed using respondents’ ratings of satisfaction with many aspects of occupancy as explanatory variables. The dependent variables include satisfaction with property management, value for money, overall occupier satisfaction, lease renewal intentions and occupiers’ willingness to recommend their landlord.

The aspects with most impact on occupiers’ satisfaction are the office building itself, its location and amenities, and also communication with their property manager, a belief that their business needs are understood and the property manager’s responsiveness to occupiers’ requests. Occupiers’ loyalty depends mainly upon feeling that their rent and service charges provide value for money, an amicable leasing process, the professionalism of their property manager and the corporate social responsibility of the landlord. “Empathy” is crucial to occupiers’ willingness to recommend their landlord, and clear documentation and efficient legal process improve occupiers’ perception of receiving “Value for Money”.

The sample is skewed towards occupiers of prime office buildings in the UK, owned by landlords who care sufficiently about their tenants to commission studies into occupier satisfaction.

This research should help to improve the landlord – tenant relationship, benefitting the businesses that rent property and helping building managers understand where to focus their efforts to achieve maximum effect on occupier satisfaction, loyalty and advocacy.

There has been little academic research into the determinants of satisfaction of occupiers of UK commercial property. This large-scale study enables the most influential factors to be identified and prioritised.