Part One: The Rat Race – on the final straight?
As lockdown eases, attentions are again turning to the office. Huge questions remain about what "the return" is going to look and feel like.
The broad consensus seems to be possibly two or three days a week in either place. We have all missed seeing and collaborating with colleagues and friends, but other elements of daily life – such as sitting on the central line in the summer – are gladly forgotten!
What will actually happen?
If the status quo becomes two to three days in the office then in the long term companies will want to reduce the space they take exclusively for their employees. It will, we think, become rare that businesses have enough space to accommodate their entire workforce because they just won’t need that capacity. Boodle Hatfield already manages access to our offices through an app; even with this sort of space management system, it may well be that the office is rarely completely occupied.
This presents an interesting opportunity for all parts of the commercial property eco-system.
What’s the purpose of an office?
As we have touched on, people like the office because they like meeting, collaborating and building relationships with colleagues and clients. Junior (and senior) team members find supervision easier in real life.
Offices are also an important part of a company’s culture and identity – an office around St James’ Street means a private wealth focus, Paternoster Square – a bank or city firm, the Old Street “Tech Roundabout” – a start-up.
Zoom works for many meetings, but sometimes being in a room is better. Whilst large board meetings can easily be replicated in the virtual world, in contrast, smaller more intimate meetings, where eye contact and a handshake are key, will remain firmly offline. As virtual meetings continue back in the “real world”, offices will need to adapt to accommodate breakout rooms for this purpose.
Several challenges lie ahead for businesses:
- How to attract staff back into the office?
- How to recruit and retain good quality staff?
- How to ensure that they have the right amount of office space?
The Hub and Spoke Model
Some think the key to solving some of these challenges may lie in employers taking more of a ‘hub and spoke’ approach to office space.
The hub: This is likely to mean keeping a small central base which has great client entertaining spaces because, come-what-may, these places carry a certain prestige and (more practically) benefit from a great transport network.
The spokes: The nature of the old “hub” model is what created the “commuter belt”; we all want to live close to work but few can afford to do so, so we live in the suburbs.
Although many would rather meet a client or intermediary (new or old) in person because that’s how relationships develop, there is a cost-benefit analysis to be done in terms of both parties travelling to a fixed location in a city. There’s no reason why we should not have access to an office closer to home. After all, maintaining a sense of office culture does not require an entire workforce to be in one building, it just requires teams to be able to work together.
Both the Government and Standard Chartered have partnered with IWG to give their employees access to a national network of offices to allow flexible working.
How this will materialise is currently unclear. Does this mean that we are likely to see organisations letting office space in the commuter belt? We think this is unlikely. Instead, we see employers subscribing to a platform, which will give their employees gym-style access to great working spaces in regional areas. HubbleHQ have recently launched a subscription pass for this kind of ‘office as a service’.
Herein lies an opportunity for building owners in the suburbs currently struggling to let their building. Could redundant retail space be converted into office space and listed on such a platform? Could coffee shops and restaurants generate extra income, by introducing a workspace area into their unit and then listing this on a platform? Coffee shops are already informally being used as workspaces, so we can see the attraction to those organisations of generating a little extra income and in return offering a more purpose-built space.
For organisations, the ‘hub and spoke model’ will give employees access to great space with opportunities to meet and collaborate with others but without the dreaded commute. Employers can vary their subscription to the platform as and when employees leave and join and as a result, will never fear having too little or too much space.
Desks for Hire
But what about those organisations that signed a 20 year lease back in 2019? Where a company has taken three or four floors of a building in Canary Wharf, but now realises it only needs one or two, there is now a real need to deal with this space. Empty desks are like empty tables in a restaurant – expensive.
In the immediate future, companies may try to sublet space. However, with many organisations in the same boat, this may prove tricky. In addition, the company may be prohibited from subletting.
Instead, as we look ahead, we may yet see an Airbnb of commercial desk space. With apps now in use for booking desk space, could employers work out how many desks are not going to be used on any given day and list those unused desk space on a platform for hire?
Security concerns are now much allayed because most people do not need physical space for documents; their entire “workspace” is a folder on their laptop. The argument that employees working in a shared space is a major data risk is becoming outdated. Far more damaging is a data breach through the company IT systems.
Organisations will need to be mindful of the terms of their lease and ensure that they are not prohibited from sharing occupation or, instead, secure the necessary permissions from their landlords to enable them to list desks on a platform. Commercial landlords are likely to be amenable to such an arrangement if this will mean that an organisation can more easily afford the rent; are less likely to exercise an upcoming break clause; and are more likely to take a lease renewal provided that the third party occupier does not achieve security of tenure.
Beyond Desks for Hire
Airbnb started out life as a platform for letting out unused rooms in occupied houses and now properties are being bought specifically to be listed on Airbnb. In due course, could we see buildings being leased or bought with the sole intention of listing it on the Airbnb of the commercial world?
This goes beyond the existing serviced office or WeWork style model. A successful platform will offer the end user far more flexibility in terms of the nature and location of the space, and the terms of occupation, than a subscription to one serviced office provider could ever offer. Think about Airbnb – if you wanted to stay in an old Shepherd’s Hut in Bath, you can almost guarantee you will find something suitable.
From a space provider’s perspective, listing serviced office space on a platform will enable the space provider to advertise to a far wider pool of people than it would otherwise achieve if the space was only advertised on google. The space might also be more attractive to a wider number of people, who would never have signed up for a contract with the space provider as their low level of demand for the space would not have made such a contract economically viable.
In addition, we envisage this sort of model going beyond office space. Could we see this model be used for industrial units? Dark kitchens? Pop-up shops and restaurants? Life science space? This stands to assist organisations whose space requirements ebb and flow in any given year.
Click here to read part two of this article looking at the Prop Tech opportunities when decentralising the office.