As lockdown measures are eased businesses are drawing breath and taking stock of the past few months. We speak to Ben Ashby about his views on the office market and the need for offices.
What are the top three concerns that businesses have regarding their current office space?
Under Utilisation & Cost - The primary concern for most businesses is clearly the fact that they have not been able
to physically use their space since the lockdown announcement in March and the majority are still not operating from them fully. This has led to questions regarding the paying of rent and service charge on a space that has been underutilised, or when services such as security/front-of-the-house are not being provided.
Working Practices – Some businesses have asked themselves, why has it taken a pandemic for them to realise that a significant proportion of the workforce can do their jobs far more efficiently from a remote setting. The success of adjusting to working from home and as we slowly move towards some sort of “normality”, many businesses are now considering their workspace needs. In some cases, it may be drastically lesser than before – prompting the disposal of surplus space, or if their leases permit, to terminate them and find a smaller office elsewhere. Never has business continuity planning been so vital!
Post-Covid Capex - “How will the office look post-COVID?”, and what adaptations do businesses need to undertake to make their staff safe and ensure COVID compliance. Social distancing rules mean fewer workstations and tighter controls on break out spaces and meeting rooms, and so capital expenditure will be required to make adjustments.
Debate has been rife in the past few months about the ‘death of the office’ – knee-jerk reaction or reality?
This has certainly been a hot topic during the height of the COVID-19-crisis. Large businesses such as EY, RBS and, Barclays, have been widely reported telling their staff not to return to the office until the beginning of next year. This equates to thousands of people and consequently many tens of thousands of square feet of redundant space, which has led to questions from their CEOs and CFOs whether to totally remove the office from their operations – for now, anyway. Yet, many businesses that I talk to, the “death of the office” is a vastly over-exaggerated reaction, as the office is needed to maintain their company culture and enhance productivity in a collaborative approach.
To some extent, the knee-jerk reaction is understandable as workers have shown that work can be effectively done away from the office. I cannot foresee the decline of the office; I think a more hybrid solution will be
widely adopted. The office provides a vital social interaction function needed for a whole host of things that make a business - personal development, mentoring the younger cohort, cross-pollination of ideas, and enriching a company’s culture. Of course, social distancing guidelines will change office usage and layout, and most probably for the long-term, but the notion needing some sort of an office will run deep in most companies for a long while yet.
What has been the appetite from your clients in searching for new office space?
For those businesses that were engaged in live relocation projects prior to lockdown, a small number have progressed with their transactions. Unless a time-critical lease event dictated that a move was essential, and most of our clients normally commence their relocation projects well ahead of time, and fortuitously so, then this did not prove to be too much of an issue. Since the lockdown measures have relaxed, there has been a slow trickle of activity in terms of projects getting back up and running. But in almost all cases, the requirements are now much more refined than the original brief.
For those clients looking, have requirements changed?
A reduction in the volume of space because of new working practices.
Greater focus on the workforce - employee profiling, greater staff engagement has been important aspects of Return to Work Risk Assessments.
Flexibility is a fundamental part of this “new” world, and the interest in the flex / short term office is significant. Occupiers who do have to make relocation decisions in the next 12 months, will be looking closely at flex options to ensure they can benefit from rental declines and increased incentives that are expected in 2020 and 2021.
How are flexible leasing solutions supporting DeVono clients?
For those occupiers who have the immediacy of lease events looming, the flexible office market provides a welcome solution for the short-term. Businesses can “take stock” of the current situation and take the minimal amount of space required. Whilst flexible leasing is for some a stopgap, it can also provide businesses with more longer-term flexibility, adjusting their space with their changing business needs.
Most providers of flexible space have been discounting their products significantly for the past few months, with a ratcheting up on price as the term progresses. But with builtin flexibility, in 12 months’ time, occupiers will be able to benefit from re-entering into the leasehold market which has more than likely declined in terms of rents. The idea of forecasting and planning any longer term than that right now is difficult for many.
Flexible office leasing has evolved in recent years, have clients impressions changed?
The overall impression of the flexible office market amongst occupiers has matured greatly in recent years. No longer is it seen as the expensive option, that is bland, impersonal, and lacking in identity. Nowadays, the providers of flexible space have thought long and hard about what it is that occupiers want and need. The level of choice out there is so much more diverse than before.
The sheer number of providers in the market has meant that competition for customers has increased, and therefore, pricing has become far more attractive. Better levels of customer care and improved overall service experience for the end-user has meant that more of our clients undertake dual searches (leasehold and serviced) in almost all projects of less than 10,000 sq ft.
A recession and Brexit to come in the next six months, how do you think these will impact the market for office space?
The impact of COVID-19 across most of central London will be significant – rising levels of supply, reduced occupier demand, longer marketing void periods, rental declines, and a generally slower pace of refurbishment and development – will all lead to a perfect storm for occupiers entering the market over the next 12 months. The ball will be in the tenant’s court!
How have you found working in this environment, compared to previous periods of economic uncertainty?
This period of lockdown and the immediate aftermath has led to a mix of emotions and sentiment about how I feel about the working environment. On the one hand, I take comfort from the enormous sense of camaraderie and togetherness that we are all experiencing this in similar ways (albeit I fully appreciate there are people in far worse situations than I). But then there are the enormous challenges that we have been thrown headfirst into, as we were
forced overnight to adapt our work / life balance and the normal routine that we all became so accustomed to. I do not miss my one and a half hour commute twice a day, but I certainly do miss the buzz of the office environment and being around my colleagues and fellow agents within the market.
The future is uncertain of course, but I go into the rest of the year with a strong sense of confidence and a positive attitude that we will make of this what we can, and more, and that DeVono as a business will emerge post COVID in a stronger place than when we went in continuing to support our clients.