The pace at which COVID-19 arrived in the UK resulted in the most severe lockdown measures since the second world war, taking the country by surprise. Yet, no amount of business planning at the start of 2020 could have accounted for such restrictions on movement and the ability to conduct business. To reverse such actions and get people back into the office will not only be a mammoth organisational task, but it will require authorities and businesses to tread a fine line, as not to risk sparking a second wave of infection. The return to the office will be gradual and as such, could have longer-term implications on how office space is viewed or even retained in the short-term.
RESPONDING TO TENANTS
The timing of the lockdown coincided with the quarterly rent collection period. For many businesses, this could not have come at a worse time. Cognisant of this fact, DeVono extended the offer of Pro Bono support to all businesses alike and not just our clients, in order to help through this initial period. The subsequent response has been overwhelming. We are currently engaged with over 130 firms who responded to our offer of support – spending the past few weeks working on topics ranging from rent deferment and reduction, business rates and lease breaks, through to space planning.
The next rent collection period is looming. Whilst new government legislation protects commercial tenants from eviction or forceful rent demands as a result of COVID-19 up until 30 June 2020, financial obligation will remain. Recent data from rent collection software company Re-Leased suggests that just 54% of commercial tenants tracked across all property types paid their Q1 rents. Whilst most landlords are supportive and offering various payment plans, this should not be taken for granted and dialogue with your landlord should take place at the earliest point possible.
As the length of the lockdown increases so does the squeeze on cash-flow in Q2. As a result of conversations with tenants, landlords and solicitors, we have produced an FAQ document to help businesses with answering some of those initial questions, that only now may be relevant to them. This document can be found here.
KEEP YOUR DISTANCE – SOCIAL DISTANCING IN THE OFFICE
Maintaining social distancing rules, whether it be 2 metres or less will be the overriding factor that allows us back into the office in the short-term. The practicality of introducing such measures will require substantial planning by businesses, additional costs and another period of adjustment to allow for new models of working. Nevertheless, both industry and government are keen to move to the next phase.
For the office commuter, the daily routine is likely to be more regimented and possibly a lengthier one. As not to repeat scenes of overcrowding, as we did in the initial weeks of lockdown, transport bosses will look to increase the capacity of services, whilst also regulating passenger numbers. In theory, this may work. However, in practice, any
system introduced will have its teething problems and will likely impact journey times. These measures may well force travellers to seek alternative transport, increasing the use of cars, bicycles, walking and even electric scooters.
Government guidelines on reopening the office will limit the number of staff that can be in the workplace at any given time. Businesses will be faced with the challenge of ensuring that workers are safely distanced, sharing of equipment is limited, use of communal areas such as kitchens are restricted and there is limited face-to -face
interaction. Not discounting the inevitable queue to catch the lift. This will all make the office a very different place to work. To comply with the measures, it is expected that workers will be phased back to the workplace, achieved by rota systems and staggering of working patterns.
Whether a company has big or small offices, the logistical planning of such a return could be substantial. Bosses must weigh up the pros and cons of remote working, the possible impact on productivity, disjointed hours of working and the impact on staff. All whilst ensuring the business is trying to resume normality. These hurdles may well be overcome in the initial period of re-transition, but in what will become a very cost-conscious environment for businesses, the office as a business tool will come under scrutiny.
RE-EVALUATING THE OFFICE
Both the mainstream and property press have all been busy ruminating on the future of the office and what businesses are going to do about their space. Some of these comments have been knee-jerk reactions during the infancy of the lockdown, largely as a result of the successful introduction of remote working practices. However, there will be an element of validity in the calls to review office space, not necessarily whether to have one or not, but more a review of its use, the size or even location and cost.
The pandemic has forced businesses to be agile and is now forcing them to be cost-conscious. The latest Deloitte survey of Chief Financial Officers (CFOs) shows that businesses have gone into defensive mode – no shock there. But as a result, a reduction in costs has become the top priority of CFOs. This is alongside an increase in focus towards disposing of assets and a reduction in CAPEX spend. Whilst the sentiment is not necessarily directed towards the office, the significant contribution of office costs to overall expenditure will add further weight to calls to review office accommodation.
Businesses will be mindful not to make rash decisions as what happens during 2020-21 may only be temporary and
dependant on tackling COVID-19. So, what could impact business decisions on office space both in the short and long-term?
This list is not exhaustive but indicates the challenges that businesses and the real estate industry will face in ensuring that the office remains relevant and meets not just the needs of today’s crisis, but those in the next 2-5 years and beyond.
Whilst leasing activity of space slowed down to a trickle in many locations as a result of the current situation; businesses are continuing to commit to new space and progressing with transactions. Firms who pressed pause on decision making now have the opportunity to revisit those plans. Likewise, landlords, developers and architects will also be reflecting on the crisis and looking at ways in which the office can not only be adapted to cope with the crisis but evolve into the next generation of the workplace.
This is a time of enormous uncertainty and one that will undoubtedly leave an indelible mark on our industry and change the way we advise, support and ultimately represent our clients and their needs. We stand ready to meet