The impact of the safety measures introduced to combat the spread of COVID-19 has dramatically changed working practice, not least the market and value of commercial property. A workforce well adjusted to remote working, digital workflow management platforms and uncertain futures are all driving businesses to restructure and consider flexible office working.
Falling Demand for Office Space Reforms Working Practice
Markets have witnessed a far reaching shift in dynamics and driving forces over the past eighteen months. Empty shops vacated by retailers unable to guarantee the standard business rates are being occupied by pop up exhibitions and artisan markets. Billboards and busses are filling up with creative art and community projects where advertising spaces lie dormant, especially in the almost abandoned city business districts. Property consultancy DeVono Cresa reports that commercial occupier demand for London office space fell by 30 percent across the first quarter (Q1) of 2020. According to their analysis there was a drop in the number of financial firms leasing space in London. Q1 also saw the lowest level of deals across the West End in three years. Plus the average deal value continues to fall, standing at 5,785 sq ft in Q1. The amount of available office space increased by 2 percent across the quarter to 13.8 m sq ft. Prime rents for a London office remained at zero growth in Q1, the same level as the last quarter. An aftershock of the stay at home order enacted on 23rd March 2020, is a slump in demand for permanent office space. Some businesses have found their remote workers adjusted so well that they no longer want to pay expensive office rent, where they could alternatively be subletting desk space. Especially considering the ‘spacing out’ required to entice workers back into the workplace. Social distancing measures, increased need for ventilation and workforce nervousness about spending extended periods in shoulder rubbing distance with a large group of other people, means that traditional office space can only effectively welcome back fewer than half of its occupants, at any one time. Another noticeable challenge is Brexit induced anxiety over businesses moving operations abroad to benefit from access to the single market. The shifting dynamic of the wider business environment as well as the London market for commercial property is forcing some companies to look at their real estate with a different lens. The prediction that returning to office based working 5 days a week as standard practice, is being driven by the disruption to creative problem solving caused by remote working, but new working trends may also feature more prominently than we were used to pre-2020.
By comparison commercial property marketers are seeing “unprecedented demand” for its flexible office services as many more businesses adopted hybrid working. ‘Most firms want a five-day office‘ says Jessica Bowles, director of strategy at commercial property developer Bruntwood. Her firm has also seen a lot of demand for flexible and serviced office space on short leases. “We’ve had really strong take-up. People want flexible terms. “For businesses, following a rapid period of readjustment triggered by COVID-19, the focus is now shifting towards a planned yet gradual return to the office and on devising a longer-term strategy for the workforce and the workplace,” said Shaun Dawson, Head of Insights at DeVono Cresa. “While most businesses will be reimaging and redesigning their office space to adhere to ‘COVID-19 secure’ guidelines, in the short-to-medium term, we expect some others to switch to the serviced office model,” he added. “COVID-19 will undoubtedly impact the short-to-medium term office rental decisions though we may only start to see its true impact in the results from Q2 of 2020. However, we remain hopeful that the commercial property market will bounce back in the long run,” Sectors signing some of the biggest regional office deals recently were public services, education and health.
Flexible office spaces essentially offer trendy, serviced work spaces shared with other businesses. This provides a ready-to-go workspace, plus networking events and stocked kitchenettes, transforming the working landscape into one that celebrates the productivity power of a breakout space – and a weekly calendar of networking events. Attracting disruptive tech startups and bigger corporations, businesses of all sizes benefit from the ease, flexibility and cost-effectiveness of the serviced office route. In the past businesses that required a lot of desk space would find themselves locked into lengthy decades long contracts. Even today’s traditional, seven-year London leases represent a long-term commitment to the same square footage, hefty upfront costs, and the chore of having to furnish a completely empty space (and of course, clear it out once when you leave). Flexible offices give you the agility to move straight in, shrink and grow your space depending on your headcount, budget accordingly with an all-inclusive cost and stay flexible with a monthly rolling contract. Flexible office spaces offer trendy, ready-to-go workspaces, networking events and stocked kitchenettes, paving the way for a new world of work; one that celebrates the productivity power of a breakout space – and a weekly calendar of networking events. Flexible offices give you the agility to move straight in, shrink and grow your space depending on your headcount, budget accordingly with an all-inclusive cost and stay flexible with a monthly rolling contract.
Productivity is the New Normal
Furthermore, customer focussed contracts that are as flexible as modern businesses need them to be. Flexible office space has changed what we have come to expect from our offices. Ergonomic design and inspiring surroundings have become de rigueur. Everything from inclusive, universal design to the benefits of biophilic interiors, whereby the surroundings are consciously designed to increase occupant connectivity to the natural environment through the use of direct nature, indirect nature, and space and place conditions. Used at both the building and city-scale, it is argued that this idea has health, environmental, and economic benefits for building occupants and urban environments. Workers’ well-being has shifted from the employee’s responsibility to the employer’s responsibility, some businesses would rather lean on workplace experts (like providers) to answer the need. A happy, sociable workforce invites innovation, productivity and collaboration. We know why flexible office space is so popular, but in a post-lockdown world, certain market shifts could drive a new wave of businesses towards it. We could see more big businesses making the switch to flexible offices driven by market uncertainty about future trading, tricky cash flow forecasting following a year of disruption, plus the need to overhaul existing office working space to accommodate social distancing measures. The future is unclear for so many industries. The future of trading is full of uncertainty for many businesses. Businesses may be cautious with their plans. To ease that level of uncertainty, some will choose to start aligning their proprietary strategies to ensure a sense of flexibility and freedom, which is exactly what flexible office space provides. This is especially appealing for startups and scale-ups, who will need to conservatively estimate their valuation. Flexible offices can plug the gap for businesses awaiting delayed refitting projects due to supply chain and construction delays. Those in need of a stop-gap solution will be enticed by flexible office’s ‘ready-to-go’ workspaces – especially considering the speed at which you can start your search and move in two weeks later. Under social distancing guidelines, offices may no longer be able to welcome the same number of employees as they used to. For a period of time, businesses that are tied into traditional leases might find themselves with just 50% of their previous office capacity. Naturally, this will create an overhang of employees who need space to work in. Some businesses will embrace a rota system and others will continue to work from home, but not everybody wants to. Younger generations are keen to get back – especially those who have spent the past few months working from their bedrooms, sharing a WiFi connection with flatmates and having to walk to a park to enjoy the sun. Responsive businesses who recognise the value of office space might choose to place employees in satellite offices near their homes or in flexible overflow space near company HQs. We can expect significant business restructuring coming in. We’ve got digital transformation pressures emerging and a workforce well adjusted to remote working practices. When it comes to office space, there’s no one size fits all. Flexible office space is just one of your options. For some businesses, traditional office space might be a better fit right now, as it’s great for stamping your brand on and having complete privacy, security and control. You can even let your imagination run wild with layout and design.
At Prestige Business Management we can help your Business
Are you considering restructuring your business to help your profitability bounce back? At Prestige Business Management we can help your business understand the best solutions for the success of your business. Find out what we can do for you. Call us today on 0203 773 2927.