The Future of Offices and Office Based Working

Posted by Realest on 30th July 2020 -

As we approach the beginning of the end of Lockdown, in this article we have considered what the ‘new normal’ will mean for offices and office based working. Whilst there has been the necessity for home working through these uncertain times, is this going to become a fundamental element of corporate operational strategy moving forward?

The last 30 years has seen a revolution in the way in which businesses occupy office accommodation. Long gone are the days of cellular offices and typically staff to office ratio of 1:130 ft2 accommodated in basic rectangular concrete framed multi-storey buildings. These have been replaced by modern, open plan, ideally large floor plate accommodation with raised floors, air conditioning and a staff ratio of circa 1:50 ft2 and sometimes lower still. In more recent years, we have seen a move towards modern aesthetics including exposed services for a post-modern industrial work look with staff breakout areas, large entrance reception/atrium, even concierge or coffee shop facilities.

Alongside these changes, we have seen hot desking, agile working, home offices and even coffee shop offices as office workers now use technology to work remotely.

The arguments for these modern practices fundamentally boil down to cost as clearly you can halve your property costs if you occupy at twice the density; well that’s the argument.

We would argue, and indeed have done so at senior levels in FTSE companies, that this focus on office cost/rent might miss the point. Such density of use incurs other costs which are hidden and difficult sometimes to quantify. These include:

1. Faster burn through hard and soft FM

2. Requirement for increased air conditioning capabilities, often beyond that which has been prescribed by the original development and necessitating retrofitting

3. Expansion of toilets and other staff facilities and very often into the built office accommodation

4. Problems in noise attenuation

5. A sense that staff are no longer valued. The workers are not worth a desk. Executives still often have an office though!

6. High density use does allow for easier transmission of sickness. This is a particular issue post Covid-19

We would argue that the relentless drive on costs for higher skilled uses can detract from performance. How often do we see tensions over meeting rooms as people compete for space to meet or work away from their bench desks?

Most office occupiers are trying to attract the best possible staff and a good working environment can be part of the difference. After all, most people want to work effectively and in good conditions.

We have never met anyone who actually enjoyed looking for a spare hot desk and sitting away from their team and immediate colleagues. Given a choice, would anyone opt for a bench as opposed to a desk?

Sitting with your team can drive ideas and productivity. Just mixing people up in a random way is unlikely to do this. Not for nothing is the army set up with battalions and platoons.

A move to a good office environment and facilities can assist staff retention and encourage cultural change. By way of an example, Centrica moved staff from a 1980’s office building to a “green” building at Oxford Business Park. The staff feedback improved by circa 25% and engendered a real feeling of pride in the organisation.

Post Covid-19

There has been a lot of chatter about whether or not the post Covid-19 period will drive a significant change in how we occupy offices. Much of this predicated on the fact that we have all worked from home and it has been successful. We can imagine FDs looking at this as the new normal.

In truth, we do not think this will occur in fact quite possibly the opposite.

1. Clearly not everybody has enjoyed working from home. Although yet to be proven empirically, our sense is that productivity has dropped significantly with lots more meetings and calls just to keep everyone up to speed.

2. Even with the modern Teams and Zoom meetings, some degree of staff interaction is simply lost and the ability to argue through ideas and cross-referenced thinking is reduced. Online meetings are simply not as effective or efficient and, in some cases, the misunderstanding can create problems

3. Now the novelty has worn off, working from home has become problematic for many with day to day issues of family life.

4. Equally, although people are happy to give up personal space in a crisis, we are not entirely sure that everyone will be willing to give up rooms in their house on a semi-permanent basis to facilitate cost savings for their employer. What happens if 2 or more people need to work from home? Lawyers are already prophesying claims for unsafe working!

5. Most families probably now appreciate the ‘space’ working in an office gives to their personal lives.  We do not think that most families will accept sharing space 24/7 even out of lockdown. Indeed, 7 weeks into self-isolation, some families are struggling.

As a result, we think that staff density has gone considerably too far. In the post Covid-19 period, it is certain that people will be reluctant to go back at all pre-vaccine if that involves a commute and the underground/buses. Indeed, we understand that one of the strategies being pursued by a number of firms will be to split their staff into various teams with somewhere between a third of each office population attending on alternate days. In other words, returning to something like the original staff densities from 20 years ago!

Equally, the modern use of a hot desk is unlikely to be acceptable to staff on health and safety grounds. It is only anecdotal, but most occupiers of a hot desk either do not clean the desk beforehand or do so with some antiseptic wipes. This is clearly some way off from what is really required to deep clean a workstation. Indeed, if companies insist on hotdesking, we perceive it may well lead to claims from impacted staff who suddenly become ill and there is every sign that Covid-19 is going to be with us for some time.

Business Continuity

Clearly businesses will need to plan for the future and we think there are two areas where companies will focus.

Those companies that have an outsourced back-office to countries such as India and South Africa, etc. may need to re-examine this. Indeed, we understand there are signs of this happening already. Whereas UK financial companies have been able to send staff home and, to some extent business continued (albeit fitfully) as normal, this has not been possible in lower-cost economies. Therefore, we understand that the majority of the back-office operations in India, South Africa, etc. are closed with no backup. Things just stopped. We therefore anticipate some degree of return of the functions to the UK.

The demand for reserve space will also increase as companies understand that they need better business continuity systems and potentially the ability to expand into additional space albeit on a short-term basis.

Building and Site Specific Issues

It has been commented that there may well be a review of large metropolitan centres as the base for offices. We already understand there has been staff resistance to returning to London and no doubt Birmingham as well. Indeed, we know of one significant plc which is looking to relocate its staff from its central London offices to their regional centres where possible.

Adding to this, high-rise buildings requiring the use of lifts is highly problematic and we are aware of companies now having to use a member of staff to limit the number using a lift any one time; reminiscent from the early days of lift attendant operators. Clearly this is highly inefficient.

These things taken together suggest that out-of-town locations which staff can access by car and where buildings typically tend to be two or three stories should, at least while this current concern exists, be net beneficiaries of the outbreak.

The Future of Offices

Assuming some return to the normal level of office employment (similar to say last year), we think there will be a significant cost push from companies and some resistance to expanding office space.

Nevertheless, we consider that the efficiency gains and staff retention issues above will necessitate some form of sensible compromise and the damage to the office sector will not be as significant as some commentators have feared. Indeed, we would argue that for many organisations there will be an absolute requirement for more accommodation to be taken if they are able to continue trading in the medium term. So, yes, the demand may fall but not as precipitously as some have forecast.

For more information, contact Steven Williams or David Ferriman.