What will be the future of office leasing after Covid-19? The use of “composite deals” had already started to take off before the current crisis hit and may be a useful option for corporate occupiers after Covid-19 passes for those uncertain of their future property needs and looking to build in some flexibility.
So, what is a “composite deal”?
In a leasing context it is a deal in which a large corporate occupier will join forces with a flexible workspace provider so as to lease an entire building by way of separate leases but on a collaborative basis. Separate arrangements are negotiated enabling the corporate occupier and co-working operator to expand and contract on a reciprocal basis into and out of each other’s space.
The composite nature of these transactions will have benefits to all the parties. It will be attractive to landlords looking to let an entire building. The obvious appeal to a corporate occupier is the ability to be flexible in relation to its space requirements in an uncertain time. For the co-working operator it provides a client on its doorstep and the potential opportunity to expand its footprint. In an uncertain market (especially after Covid-19) it will help to ease the worries of some landlords with the security of knowing that there is full occupancy from day one.
A knock-on effect of composite deals is that we are likely to see more occupiers wanting to manage and brand their own receptions and common parts (which usually falls to the landlord). This means that both landlords and corporate occupiers are going to have to enter leasing transactions with a much more collaborative mindset. Covid-19 is certainly showing us that collaboration is key.
We have already helped to advise on such transactions in 2020 and believe there will only be a rise in composite deals moving forwards.