The gap has never been more significant between the objectives of traditional owners and tenants

Is ownership truly providing any material advantage over its competition?

Owners, capital, and lenders want locked-in, predictable "bond yield" lease commitments for a material period of time for to which they can apply a cap rate. Further, they want to secure this commitment from a "credit tenant" who is happy to deploy additional capital resources guaranteeing this cash flow back to ownership no matter what. 


End-users want the exact opposite. Tenants want to deploy their capital into areas producing an ROI (not into new furniture!), and to align their real estate commitment to the predictability of their business plans. Given the new latitudes around work-from-home (WFH), this will be harder than ever to rationalize as businesses get their arms around how much space they really need once these new behaviors settle in.


That means a 5+ year lease should map perfectly to a 5+ year strategy? Unlikely. In the modern era, company planning horizons average less than 18 months as evolutions in technology, operating objectives, Talent markets, and M&A activity all interfere with the plan. 


Add all of this up with the fact that most (if not all) owners deliver an end-user experience that is relatively undifferentiated from other office alternatives the tenant has, and this provides ownership with little, if any material advantage over its competition. 



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