13 May 2021/ rent_serviced_office_guide

Will flexible workspaces overtake traditional offices?

Almost overnight, kitchen tables became desks, bookcases became the go-to background for Zoom calls, and dining rooms turned into conference centres. While businesses worldwide hastily implemented continuity plans to maintain ‘business as usual’, office buildings stood empty.

With the light at the end of the tunnel beginning to burn a little brighter, many are left wondering what will become of the office in the workplace of the future?

Here are some of our predictions for the role of offices in the post-pandemic workplace.

Traditional office space will continue to decline

 As we emerge from the crisis and begin the process of kick-starting the economy again, businesses are eyeballing the real estate line item in their operating budgets. As such, many business leaders across the country are looking to exchange their traditional, fixed real estate commitments for more adaptable, flexible and inspiring workspaces designed for collaboration.

A recent survey from KPMG found that nearly 70% of large-company CEOs plan to reduce their office space. A similar survey of real estate market participants in July and August 2020 by Ernst & Young LLP (EY) indicated that 80% of respondents expect demand for traditional office space to decline over the next three years.

In the meantime, major companies like JPMorgan Chase, Salesforce, and PricewaterhouseCoopers are all looking to sublet major portions of their existing office space, according to the Wall Street Journal.

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Reports of the death of the office will have been greatly exaggerated

However, this does not herald the death of the entire sector.

The COVID-19 stimulus injected into the economy last year has helped keep the sector resilient, with central bank programmes pushing European bond yields into negative territory.

According to Savills, the average spread between bond and rental yields on prime European office space is now approximately 3.25 percentage points, well above the historical average. The sector is still attractive to and lucrative for global investors. However, the absence of tenants will undoubtedly catch up with the market, and it’s difficult to imagine a return to pre-COVID-19 office occupancy.

Therefore, businesses are reviewing their property requirements and using the lessons learned during what has been described as the world’s largest work-from-home experiment to reimagine the future workplace.

While the pandemic has put an end to the days of the monolithic one-size-fits-all office model, studies have shown that working from home indefinitely is ultimately unsustainable.

Even the most zealous advocates for remote work acknowledge that face-to-face interaction with colleagues is important for collaboration, innovation, morale and fostering healthy company culture. The growing number of employees reporting increased feelings of loneliness and isolation since the beginning of the pandemic also demonstrates why offices still have an important role to play.

In addition, according to Mike Hawkins, head of UK regional offices at Colliers, “The need for younger workers to collaborate and learn from others will ensure most employers maintain a physical site, with many targeting regional cities with big universities.”

There’s a need to re-envision the office model for a post-pandemic world by combining employee preference for remote work with flexible physical workplaces to connect and collaborate with their colleagues.

The rise of the hybrid “Hub and Spoke”

COVID-19 re-ignited the ‘dispersed workforce’ debate, with many touting it as the future of the post-pandemic workplace. In this scenario, it’s expected that head offices will become the new corporate showroom or central “hub” for important meetings and events. While middle management and back-office staff will embrace a hybrid model that encourages a blend of working from home and using shared office spaces closer to where they live.

The trend of building a network of smaller regional offices or “spokes” closer to employee’s homes was already gaining traction well before the pandemic. With demand for more flexibility continuing to grow, we expect this trend to become the norm in the near future.

Standard Chartered, for example, is partnering with an office provider for “near-home” flexible workspace for staff, which will allow them to walk to work in half an hour.

This hub and spoke model might not work in every city, with Simon Capaldi, a Partner in Knight Frank’s Edinburgh Agency Team, explaining that, “Some property analysts have pointed towards a hub and spoke model becoming more popular. This may be the case in large cities such as London, but it is unlikely to work in Edinburgh and Scotland more generally where conurbations tend to be smaller and commuting to central offices is less time-consuming.”

Meanwhile, the logistics of arranging a hub and spoke network might also prove to be incredibly difficult, especially if employees are scattered in many different parts of the city.

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The future is flexible

Providing flexible working solutions and workspaces could answer several key human resource challenges, especially amid global uncertainty.

These workplaces will need to be more attractive than before to entice people to commute again and leave behind the lifestyle choices they might have made during the pandemic.

Providing rows of desks for these employees to take calls or meetings and send emails won’t do. Flexible office spaces will need to be amenity-rich, with wellbeing, collaboration, and carbon neutral facilities high up on the list of boxes to tick. They’ll need to offer ready-to-go workspaces, suitable spaces to host events and well-stocked kitchenettes or hospitality services.

In response to the new ways of working brought on by the pandemic, many companies are also adopting more flexible policies for employees wanting to return to the office. For example, Google has told employees that they only need to be in the office three days a week, with many others making similar moves.

One thing for certain is that after years on the periphery, flexible workspaces will continue to grow in popularity as both businesses and investors respond to the increasing demand for flexibility now and long after the pandemic subsides.

The office 2.0

As office buildings start welcoming employees back, the odds are that they will look and feel very different to how they were in the past. Like many other businesses across almost every industry had to adapt to new ways of doing things, so too will the conventional office space. Employees and business leaders alike will expect a workplace that they can’t achieve remotely. One that’s agile, flexible and fun, offering sophisticated design, technology integration and flexible lease terms.

We predict that the future of real estate will be next to undergo a similar transformation retaining many of the key elements that helped drive this disruption in the first place.