The COVID-19 pandemic has resulted in the largest global work-from-home experiment in modern history, with the benefits of flexible working increasingly being recognised globally. However, despite widespread speculation, the end of the office is not in sight. As another month of social distancing continues, the lack of a separate workspace coupled with the fatigue of working remotely is leading many to recognise the true value of the office. However, some businesses are rethinking their traditional office space. Serviced office operators offering flexible leases must seize this moment and leverage the situation to tap into a prospective long-term client base.
The pandemic has caused a dramatic shift in working patterns, with the Office for National Statistics stating that 49% of workers reported working from home in the week prior to 14th June 2020. For most, the benefits of working from home are numerous, including fewer distractions, and saving on commute time and cost. However, for some such as young parents, pet-owners, or those in shared housing with cramped working conditions, the lines of work and home life are gradually blurring. Remote working is not necessarily conducive to consistent high performance, with an increasing number of employees working from home experiencing burnout. More businesses are realising this and are making plans to return to the office in some shape or form.
Working remotely will continue, but flexible workspace providers have a unique window of opportunity as businesses seek to reduce office costs and become increasingly flexible in regard to their space requirements. The desire for flexibility in office space leasing was demonstrated in a recent poll by DeVono showing that 73% of respondents envisage their next office space to be on flexible terms. With the cost of an office being the single largest capital expense for firms after the workforce, it is in the interest of providers to encourage occupiers to take up space as soon as possible by appropriately incentivising them early-on.
Flexible office providers need not give space away for free. However, by reducing potential costs for prospective clients during these challenging times, operators have the opportunity to gain a loyal and sustained customer base. Some providers are already providing such incentives. This is a smart attempt to lure people back to the office where working remotely is not the most optimal long-term solution.
Although advertising sizable discounts may not be appealing, or indeed feasible in some cases for serviced office providers, ongoing developments may force providers’ hands. JP Morgan has estimated that job losses related to COVID-19 will increase available space across the core of London by 4.5m to 7.1m sq ft, effectively doubling the amount of space available. Despite the Bank of England predicting a V-shaped recovery, the relative popularity of working from home and hesitation in returning to the office will mean that this space will take time to fill. As a result, there will be a shift in the balance of power between providers and occupiers in terms of rent, with occupiers holding the cards.
One measure to help both providers and occupiers alike is more clarity from the government on how offices can and should open their doors, with current guidance less than clear. In the short-to-medium-term however, as the economy gradually opens up, serviced office operators have a significant opportunity before them. With providers of all sizes increasingly offering flexible working, those who are most successful at addressing the mainly cost-related concerns of occupiers will capture a wider base of customers moving forward. We acknowledge that the serviced office industry has indeed suffered too in the months of the lockdown. However, as we begin to understand the ‘new normal’, taking an interim cost-related step back by assisting potential occupiers could afford serviced office providers in the long-term greater goodwill and a loyal customer base. Flexible leasing will now more than ever serve as a core option for occupiers.