Predicting the future is a hazardous exercise at best. We tend to project from our present circumstances. We assume that we will continue in a straight line on our current trajectory. Looking back at history reveals that – on the contrary – our path is a zigzag, continually buffeted and adjusted by unpredicted and unforeseeable events. And this has been demonstrably true over the past couple of months: who would have predicted at the turn of the year that 2020 would have turned out as it has?
The word “unprecedented” is heard over and over again in any commentary about our response to the Covid–19 pandemic. It’s tempting to suggest that its usage is currently at unprecedented levels! And yet it’s not a cliché. There simply is no precedent for the scale of the global lockdown that we’ve experienced over the past few months. Collectively and individually, we are only just beginning to contemplate the likely short and long-term repercussions of the pandemic and the lockdown – economically, socially and culturally.
As London office finders, we clearly have a stake in the viability of the London office market. It’s our livelihood. However, questions need to be asked about its future in the post-pandemic world. In a new world where the economy has been substantially damaged, where social distancing has become the norm, where many people have become used to working from home, has the traditional office suddenly passed its sell-by date? Will the market be significantly diminished? Will it largely cease to exist? Or will it re-invent itself for these changed times and bounce back anew?
In a world where social distancing has become the norm, where many people have become used to working from home, has the traditional London office suddenly passed its sell-by date? Or will it re-invent itself and bounce back anew?
We asked a panel of interested parties for their opinions on this fascinating subject – both from within the Find a London Office team and from further afield.
Will there be a reduction in the amount of London office space taken
Yes there will be a reduction, particularly over the next 12–18 months but is going to be very dependent on social distancing measures, how long they stay in place for and what those restrictions look like.
However – in the flexible, serviced office market at least – I don’t believe we will see a radical reduction in demand, particularly long-term. Having said that, we are likely to see a drop in supply over the short term as some flexible workspace providers look to consolidate their portfolios to adjust to demand.
Sadly, I think there will be a reduction in the amount of office space taken in London. I am already seeing signs of this.
Before the pandemic hit, I had agreed terms to acquire around 3000ft2 of excellent office space in Holborn and legals were progressing well. Within 24 hours of going into lockdown, my client telephoned to say he was withdrawing his offer. All his staff (24 people) are now working from home. His current lease expires this month. Once it is safe to do so, they will very likely take a short term serviced space and at the same time instruct me to find an office of 2000 ft2 to accommodate half the number of fee earners and key workers. Admin and support staff will be asked to work from home, saving the firm a small fortune. Reducing office space by a third will save them £100,000 per annum in rent, rates and service charge alone.
I think we’ll see a lot more of this in the coming months once the lockdown has lifted.
Despite the furloughing scheme, many businesses have already made redundancies – and yet more will in the months ahead. Many of these businesses will be moving premises to downsize. And more companies may be switching to more flexible, serviced offices, until things settle. So larger, conventionally leased office space may be vacant for a while, until things start to recover.
On the other hand with social distancing measures in place, businesses may need larger space for fewer people in order to comply.
I don’t think there will be a considerable reduction in space taken, but I do think that there may need to be a critical review of London office rents, service charges and business rates. Upwards only rents are ludicrous in a bear market, with businesses suffering as a result.
It’s conceivable that businesses may want to find a way to position themselves in more flexible or shorter contracts as they realise the one thing you don’t need in a pandemic is overheads.
The office market won’t change substantially, people benefit from having a team in a space. They can bounce ideas off each other and video conferencing restricts that.
Major crises act as catalysts for pre-existing trends. Think how both World Wars massively accelerated social and economic change. The coronavirus pandemic could have a similar impact. Technology has already been driving rapid change in business practices across the board as consumer habits evolve. High street retail is the obvious example – already under huge pressure from online competitors. Contactless payment has until now been a handy time and space-saving innovation. The pandemic has at a stroke turned it into a public health requirement. Currently, the idea of using a cashpoint turns my stomach.
We cannot rely on everything staying the same, just because “that’s the way they’ve always been” – even moreso when things are already changing. And no-one can deny that the London office market has evolved in recent years. The question is: will evolution now become revolution?
I suspect that the pandemic will turbocharge existing trends within the London office market. We were already at a turning point – culturally and economically – in the way we work. Dynamic, modern businesses require and demand evermore flexible working environments and practices. The massive expansion of the flexible, serviced office market in recent years is testament to this.
Added to that, employees also live busier, more complex, diverse lives and require increased flexibility from their employers.
I expect the pandemic and the lockdown will accelerate these changes and increase demand for flexibility. So there will be a corresponding reduction in demand for traditional longer leased offices.
I expect the pandemic to act as a catalyst. The lockdown will accelerate increased demand for flexibility in the London office market
Will working from home now become the norm?
The business community has – for some time – played with the idea of reducing office space usage (with its attendant costs and benefits both for employers and those employed). They’ve experimented with hot-desking, working from home and using the various IT facilities now available to all with mixed results. Take up has been patchy, with no real route being followed by business in general. However available and sophisticated IT is a game changer – enabling a far deeper think about the possibilities – with Covid–19 as the catalyst – of manifestly changing the way that we work.
I believe that a consensus will materialise between now and whenever this pandemic is beaten and business is able to recommence in a substantial way. And by the business community, for the first time I include not only “the bosses”, but also “the employed”. In the past couple of months, we’ve all become much more familiar with using Zoom and other available video conferencing facilities. A previously minority pursuit has gone mainstream overnight. After this experience, both parties will be in a position to assess how things could change permanently for their mutual benefit.
I don’t think working from home (WFH) will become the everyday norm for everyone, but it will enable some to re-enter the workforce and others to work more flexibly.
Personally I find WFH disruptive. There are too many temptations and interruptions. E.g. the fridge. I can’t stop eating! Right now my cat is driving me bonkers as he is asking to be let out of the front door. And I have just spent an unpleasant 30 minutes unpacking a Tesco shop. Besides, I love my home and don’t want to convert living space into office use. I miss the ability to chat spontaneously and creatively in order to problem solve with colleagues. But fundamentally, I like a change of environment. I prefer to leave work behind at the end of a day, with some cathartic “me time” during my cycle back home.
I miss the ability to chat spontaneously and creatively to problem solve with colleagues. Fundamentally I like a change of environment. I prefer to leave work behind at the end of a day, with some cathartic “me time” during my cycle home.
For entire businesses to work from home is very inefficient. I also believe it’s not terribly healthy to live and work under the same roof.
If anything the issues associated with working from home (distractions, interruptions, poor WiFi, not to mention video conferencing small talk!) have proved that the traditional office is more needed than ever.
Many people still prefer the focus of leaving the house and going to an office in order to get work done. There are far too many distractions at home, including childcare, a lack of structure etc. Companies will still want to see their employees as – with the best will in the world – many bosses don’t think their staff are working unless they can physically see them.
There’s been a longstanding prejudice from some employers that their staff will be less productive working from home. But we may find those beliefs may finally have been dispelled, now so many have first hand experience of working remotely. And many business may well discover the newfound cost-savings of a remote workforce very attractive in the current climate – outweighing any negatives.
We may all become more flexible: more physical meetings may be taken online or by phone as people realise how productive it can be to use Zoom.
Advances of technology and the possibilities it presents will have been made starkly apparent for many during the Covid–19 crisis. It’s now very obvious that most business interactions can take place remotely and don’t necessarily require face-to-face meetings.
It’s obvious people have taken to Zoom meetings in a big way out of necessity, so there may well be fewer face to face meetings in the future. However I don’t this will replace large important boardroom meetings.
Design companies need to work together with visuals and present face to face to the client. Law firms need to see their clients.
I think it’s horses for courses. Some tasks lend themselves better to working collectively in an office. Other jobs or tasks are actually far better suited to remote working. The bulk of my work is web development. That’s very much heads-down, blinkers on work, free of any random interruptions. It’s ideally suited to working alone from home, most of the time. But I fully appreciate that other types of work require regular interactions with others, and that working from home can be detrimental for particular tasks within some industries.
Maybe some companies will have more work from home days – sharing desk space amongst colleagues. This will reduce office costs and size. Insurance companies may well fit this model. A lot depends on whether you can motivate your team from a distance.
The pandemic has enforced working alone, but will it continue when we have the choice? It seems to be fairly clear – despite reservations – that some work can be done effectively outside the office environment. Both employers and employees will have recognised a mutual advantage in that continuing to some extent. I believe that there will be a convergence of the two views, causing a serious reassessment of how it all currently works and how the basis could be substantially redesigned. If it is the case that some work can be done on one’s own and some within an office, then surely the answer is to do a bit of both?
For example, an employee could work in the office for 2 days a week where they can interact with colleagues, then work at home for the other 3 days. Using the hot-desk principle, different members of staff could be in the office on different days.
I question whether “the bosses” really need to be able to survey their entire workforce in a single location.
Some work clearly can be done from home. Employers & employees will have seen a mutual advantage in that continuing to an extent. I think we’ll see a serious reassessment of the status quo and how it could be substantially redesigned.
Creative companies in particular have found that working long hours in the same environment is unproductive. In my view, these types of business tenants will rotate their staff – taking turns to work from home whilst their colleagues work in the office. With agile working, tenants can easily take a smaller office (even if only by 10–20%) to allow for this rotation.
Or if they maintain the same size space as they have now, but with staff rotation, they will also presumably be compliant with social distancing rules?
Counterintuitively, there is some evidence of greater productivity working from home. Plus when you cut out commuting, employees are saving time and money – as well as observing social distancing. Living in the commuter belt suddenly loses its importance, so you can also avoid the high cost of housing in major conurbations. Childcare can actually become easier, with greater flexibility in life style all round.
Counterintuitively, there is some evidence of greater productivity working from home.
I think that a huge amount of talent (previously sidelined out of the workforce e.g. women with children) will find working from home can provide a way back in. In this respect the demand for office space may increase, as more flexible staff still need to pop in to the office for important meetings and social / team events.
I think that a huge amount of talent (previously sidelined out of the workforce e.g. women with children) will find working from home can provide a way back in.
On the flip-side, reduced contact may lessen group identity and co-operation. Some businesses will find it harder to control and monitor staff. It will be more difficult to train staff. We’re social animals so loneliness may become a factor for some home workers.
I still really think that companies need to work together in order to add value as a team. They need to differentiate themselves from the competition. Companies have an ethos, a personality, a way of doing things. They have a corporate value and identity that cannot exist where talent works remotely. I have frequently been told by a host of professionals that they have learned everything from collaborating with more experienced colleagues. It is far more difficult to train younger, less experienced staff remotely.
We should also bear in mind that whilst working together in an office can greatly increase the efficiency of a company, the office cost should not be overestimated. Rent (arguably the biggest fixed cost) is dwarfed by overall cost, the largest of which is of course paying salaries.
I have frequently been told by a host of professionals that they have learned everything from collaborating with more experienced colleagues. It is far more difficult to train younger, less experienced staff remotely.
From recent conversations with occupiers, I am yet to come across anyone who favours working from home in the long term. Everyone I have spoken to has cited human interaction and staff camaraderie to be integral to their business.
It is possible a small percentage of businesses that continue working remotely, particularly in certain sectors (e.g. tech), will use meeting rooms and coworking spaces in London when they want to meet up with their team.
Some businesses may also decide that certain staff members can work remotely, occupying smaller offices for the rest of the team. However, I firmly believe the majority will continue to use their offices in London. In the long term I am hopeful the flex market will make a strong recovery.
If there is a reduction in London office space, is it likely that businesses will take space elsewhere, or will they manage without?
Most London-based companies will still retain a reasonably sized office here. London remains the capital city of the UK and the relevance of this cannot be forgotten in world trade terms.
London is still a global business hub. That won’t change.
Over the years, some companies – albeit a minority – have established auxiliary satellite offices in the home counties to house their back office staff. This idea may expand. And it may just be that some fairly senior people relocate from central London to oversee those staff.
London – like other great cities – is an international talent melting pot. The cream from all over the world comes here to create world class businesses, with cutting edge ideas, solutions and innovations. This wouldn’t be possible if everyone either worked remotely from home or in satellite offices.
London is an international talent melting pot. The cream from all over the world comes here to create world class businesses, with cutting edge ideas, solutions and innovations. This wouldn’t be possible if everyone worked from home.
My concern is that public transport just isn’t kitted out for social distancing in any way, shape or form. The government is encouraging people to cycle or walk to work as much as possible. I see that the Mayor has announced that large parts of the capital are to be made immediately car-free to facilitate that safely. That’s all very well. Yet for the overwhelming majority, it simply isn’t possible to commute to and from London without using the train, tube or bus. And we all know what that looks like during rush hour! It will be very interesting to see how London and other large cities go about reinventing themselves on the other side of this pandemic.
There will be some temptation for businesses to relocate to lower density areas that aren’t quite so dependent on public transport yet are more accessible by car. Although that comes with its own set of problems. So on balance, I think it’s far more likely most will look to retain a presence in London – albeit using less office space than previously – combined with home working where possible and appropriate.
I don’t think it is likely that space will be taken elsewhere. And I do believe that there will be an office market in London once this is all over.
However, requirements will change and this is bound to have a negative impact on rents and capital values. I can see a lot of office space being dumped on the London market. One positive is that there isn’t a great pipeline of new office space under construction in London (despite a recent surge in development) – so increased supply will rectify that. I foresee a two tier market operating: an awful lot of second hand/tenant space as opposed to a thin supply of brand new space.
I can’t see businesses relocating elsewhere. Businesses will manage without excess space, rotating their staff in the short term, at least. All the systems will remain in place – located in London.
Whilst many smaller businesses will be able to work remotely most of the time, I believe that London will retain its pull for larger businesses. Additionally, Brexit means more foreign companies will require a London branch.
I think flexible working space combined with ad hoc meeting room hire lend themselves short term – maybe for an interim office move solution. And this could work for some downsizers during a significant downturn. I’m not sure if this is a long term solution – although it has been a popular model within the start up business culture. Of course we may see the number of start ups decline, with venture capitalists becoming more risk averse to investing in firms that are not posting a profit.
I don’t think there will be a radical reduction. Small and medium companies will re-evaluate their space requirements. Because there will be such a huge fallout from this in terms of businesses struggling to rebuild, a reduction in property costs is bound to feature high on a CEO’s agenda.
In my view, a business must retain a corporate identity and ethos. That requires personal contact, so office space should be retained. However, the benefits of home working are also more and more apparent. Hence I suggest a mix of the two. The right balance will depend on the needs of the business concerned. A reduced office space combined with hot-desking and more opportunities for socialising among staff should be considered.
In my view, a business must retain a corporate identity and ethos. That requires personal contact, so office space should be retained. However, the benefits of home working are also more and more apparent. Hence I suggest a mix of the two.
What can we conclude about the future of the London office?
We’ve heard a wide variety of views about the likely effects of the coronavirus on the London office market. Some disagreement, but quite a bit of convergence as well. What can we conclude about where we are headed?
Ben Neale: We must avoid looking at the London office market in isolation. A deliberate economic shutdown of this size is without precedent. And this isn’t a typical recession, with a gradual draining of confidence and slowing of activity eventually shrinking the economy. We simply don’t know the ramifications of mothballing most of the economy overnight for several months. Except of course that it will likely be very challenging: some of the forecasts are frankly eye-watering. Most economists expect that – despite furloughing – we will eventually experience a significant rise in the jobless total. And large-scale fear of unemployment erodes consumer confidence like nothing else.
Then there is the social context. How will people behave in the aftermath of this pandemic? Will there be relief and joy at their rediscovered freedom? Some predict that pent-up demand will spark a quick bounce back recovery, with consumers spending the money they saved during the lockdown. Let’s hope that they are correct. On the other hand, social distancing measures will probably be with us for some time. Some people will be very tentative, even when lockdown restrictions are lifted. And a whiff of a second wave of infection will destroy any green shoots of economic recovery.
In this hugely challenging environment, most businesses will be forced to make some very tough choices in order to remain a going concern.
My best guess is this: to some extent the status quo will reassert itself, albeit with increased demand for flexibility. Most businesses will retain a London office presence, but significantly more people will now be working from home – at least part of the time. That will represent a significant shift in business culture.
My closing thought is this: disruption isn’t necessarily all bad. From it new ideas, fresh innovations and new businesses will emerge. Amongst existing businesses, the most agile will adapt to the “new normal” and thrive on the opportunities and new priorities it will undoubtedly create. The London office market will have to be equally adaptable in the months and years ahead.
I think we will see increased flexibility in the way businesses are set up. Imagine the scenario we’ve outlined: where a typical employee works at the office for 2 days a week – working from home the rest of the week. Would they then need to live in an expensive house on the commuter belt? Conceivably, they could live further afield, with a higher standard and lower cost of living – as well as a cheaper season ticket. A better life all round for that employee and – if practiced widely enough – a greener environment and sense of wellbeing for everyone.
With a lower cost of living for employees, that would bring into question the need for London salary weighting. Would that employee be prepared to take a lower salary in return for a better quality of life and lower living costs to boot?
Of course, this is a Win-Win as it would at a stroke reduce salary overheads for businesses in a challenging economic environment. Conversely it would allow them to retain the necessary London office space to continue to operate effectively.
I think chatter about the death of the office is slightly premature after 2 months in the sun. But sometimes in the midst of great events, we get the opportunity to reconsider the basics.
We now generally recognise that office workers can WFH easily in the short term and there are even some great advantages. We can watch box sets until 2am, get up later, depollute the roads, stop commuting, eat and drink copiously from the fridge and don lycra for midday jogs and cycle rides.
The technology has worked really well and it can also be much easier to do thoughtful written work in the privacy of home.
In conclusion, we have had 2 great experiments. 200 years working in offices and 2 months working from home. I think when the dust settles, companies and employees will aim to get the best of both worlds.
These are my predictions for the near future. Business people generally work much better together. When they are able to, they will flock back to their offices. In the short term some offices will increase in size in order to accommodate social distancing. Over the longer term, many companies will reduce the amount of space occupied by around 25%, as employees are allowed or asked to work from home for a day or 2 a week and tertiary functions are outsourced. In a more flexible work environment, latent talent (e.g. mothers with younger children) will come back into the office workforce. This will give rise to better economic productivity.
Many companies will demand more flexible lease terms incorporating more frequent tenant options to break the lease. And insurance to protect against pandemics!
I also predict a fundamental longer-term shift in the relationship between landlords and tenants, where the latter have seen that, if necessary, their businesses can survive (and thrive) without an office.
In conclusion, we have had 2 great experiments. 200 years working in offices and 2 months working from home. I think when the dust settles, companies and employees will aim to get the best of both worlds.
A word on social distancing
We’ve touched a little on the challenge that social distancing brings to businesses operating in an office environment. This will likely be a thorny subject for some time to come, so we’ll be returning to this in more detail in forthcoming blog posts.