WORK IN BEAU PLAN

The Very Best and the Rest

How the flight to quality is widening the gap between Grade A office space and the rest of the market

Following the recent changes in the business real estate sector, Work in Beau Plan shares its insights on the current trends. In many parts of the world, the future of office real estate hangs in limbo. Hybrid work patterns are pushing companies to rationalise their office space, while landlords are grappling with high vacancy and plummeting property values. Yet, the premium office segment has avoided the same fate as the rest of the market. Driven by strong demand and limited supply, occupancy and rents in top-tier buildings have never been higher. Globally, a trend of market polarisation is underway, whereby high-end office space is reshaping the landscape and leaving older, secondary stock behind.

The shift to a more employee-centric workplace

It is tempting to draw parallels between the trajectory of high-end offices today and that of luxury goods in a recession. Both defy bleak market conditions by catering to an elite customer base with relatively inelastic demand. But the similarities end here.

While modern, well-located buildings have always been important in attracting and retaining top talent, the pandemic accelerated demand at the top end of the office market. Once unavoidable features of the white-collar experience, long commutes and sterile office environments were suddenly called into question. Remote working allowed employees unprecedented autonomy over their workdays, exposing decades of frustration with the workplace. If companies wanted employees to return to the office, the proposition had to be more appealing than working from home.

Enter the super-prime office space

The new generation of premium offices comes kitted out with gyms, cafés, green spaces, roof terraces, and solid eco-credentials. One prestigious London address even hosts an urban farm where employees can harvest their lunch salad.

These top-tier offices are also more amenable to hybrid arrangements than their predecessors. In-person collaboration—a key reason hybrid workers come into the office—is facilitated through break-out zones that foster creativity. Before the pandemic, desk space comprised roughly 60% of the office blueprint. Today’s new breed of offices dedicates only half this amount to workspace, while the rest is earmarked for areas that nurture innovation or enhance employee wellbeing in some way.

As the list of occupier criteria grows longer, the performance gap between the best offices and the rest of the market widens. This phenomenon has been called the “bifurcation” of the office market.

ABC’s of office space

Office buildings are divided into three categories, with Grade A offices regarded as best-in-class. Typically well-located, these buildings are marked by distinct architecture, sleek fittings, green areas, several on-site “perks” or amenities, and professional management services. Tenants are usually well-known companies or startups on strong growth trajectories.

While the appeal of Grade A to employees is obvious, businesses occupying these spaces enjoy reputational benefits also – particularly those servicing high-profile clientele. Since the office represents an important touchpoint for these companies and their clients, it must walk the talk.

Grade A office on the rise

Grade A take-up in Mauritius has been on the rise since the pandemic, growing from 45% of total occupied space in 2019 to 54% by the end of 2023. New office space delivered in 2023 was almost exclusively Grade A buildings (94%), confirming that commercial property developers are focusing their efforts where the demand is.

“When designing The Strand, we meticulously focused on creating a Grade A building that meets the evolving needs of businesses in Mauritius.” explains Shadil Golam Hossen, Sales and Leasing Executive at Novaterra.

Though lower-tier stock still has its place for companies with more limited needs and means, high vacancy rates (23%) in Grade B/C stock suggest that the market is heading in a very clear direction.

“The future for some of this B and C infrastructure is very much an open question,” says Andreas Bjorlow, Head of Corporate Real Estate Services at Elevante Property Services. “Some owners are actively pursuing renovations, but challenges faced both in terms of the building fabric and the cost will likely dampen initiatives. It might be too costly or even unfeasible to renovate.”

In Mauritius, the flight to quality office space is accelerated by other factors

(i) Rapid expansion in key economic sectors (IT-BPO, offshore, financial services) has increased the demand for modern, high-tech office space.

(ii) International companies already based in or relocating to Mauritius have certain standardisation requirements for their divisions, namely that they should occupy Grade A buildings.

(iii) The relative affordability of Grade A space (vs. Grade B) makes it a viable option for many companies. At only a +9% price premium in areas like Ebène, the choice between Grade A and B is clear for prospective tenants. Without significant downward pressure on Grade B pricing, it is hard to see how this tier of office space will survive the Mauritian landscape once existing B-leases reach their end.

Not all Grade A space is created equal

Tactics to lure employees back to the office may have catalysed the initial flight to quality around the world. But as Grade A buildings take over the landscape, the decision between various premium offices is driven by differentiating features such as location, standout amenities, and a continued focus on sustainability.

Location, location, location

As far as office space is concerned in Mauritius, “central” may be far from ideal. Whether Port Louis or Ebène, the island’s existing business hubs are severely let down by traffic bottlenecks and inadequate parking facilities.

Whether Grade A or otherwise, the monolithic structures of Ebène and Port Louis offer an entirely different office experience from the serene, lakeside offices at Beau Plan. Only a short distance away from the action of Port Louis, Beau Plan provides a lush respite from the concrete jungle of the island’s main business hubs. While the scorching heat of Port Louis can be harsh, and the centre of the island is marked with a perpetual drizzle, the climate of Beau Plan is just right. It is airy, not overbuilt, and basks in sunshine.

Beau Plan is proof that bigger isn’t always better. The Smart City avoids the logistical challenges of the denser, more central office areas. Pedestrian pathways have been woven into the city fabric.

First-class amenities

Amenities are a key differentiator between prime and super-prime office space. A recent study showed that Grade A buildings with 10+ amenities (including one standout amenity (e.g. a roof terrace or a gym) garner the highest rents and occupancies (JLL Research, 2024). The quality of these amenities offered is equally important. The Strand, lakeside offices in Beau Plan, which boasts an in-house boutique gym and wellness bar, is also a stone’s throw from the supermarket and food options at Mahogany Shopping Promenade. Tenants have an ecosystem of amenities at their doorstep, designed to streamline their day-to-day routines.

The green advantage

As companies flock to Grade A spaces, their tolerance for environmentally unfriendly buildings diminishes – particularly as global regulation around ESG becomes stricter. However, having Grade A status does not necessitate a building’s sustainability. This is especially true of older premium builds, which often contain outdated materials and less energy-efficient systems.

Companies in Mauritius still face significant moral pressure from consumers, clients, and employees to reduce their carbon footprint – despite the absence of a formal ESG framework. The most straightforward way for companies to pre-empt regulatory changes and lower their environmental impact is to lease office space in green-certified buildings. The upsides of occupying such buildings go beyond regulatory compliance and improved stakeholder perception. Green buildings have been shown to reduce operating costs because they are designed to consume less energy and water. As the first EDGE-certified building in Mauritius, The Strand uses 40% less energy and 33% less water than a conventional building, translating into significant savings in tenant utility bills.

When asked about their move from Port Louis to Grade A space at The Strand, CEO of Investec Mauritius Grant Parsons commented, “This is more than a change of location. Moving our operations to the Strand is a statement of purpose and a commitment to a brighter and more sustainable future. Investec clients can rest assured that they are dealing with a sustainable, financially resilient, and ethical business—here for the long term.”

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Thanks to Elevante for their insights. Written by Kavita Choksi for Beau Plan.