The Office Post-COVID: Death or Evolution?
The death of the office has been announced many times. Its funeral rites are being read again.
However, while COVID 19 has accelerated the death of physical retail at warp speed, my prediction is that, once again, the office will evolve out of this crisis into something new.
First, an observation that applies to many forms of real estate, pubs, clubs and football stadia as well as the office. The pandemic will not change human nature. We need real face to face contact. No amount of video conferencing is a substitute for learning from your boss, noting your counterparty’s telling hesitation in a meeting, or the office Christmas party. Thus my sense is that we will gravitate to the strange universe of the office for a while yet.
Here are a few harmless predictions, to add to the millions.
Overall office space will reduce, but what remains will be better used, as we value what can only be done face to face, but also appreciate what can be done, and sometimes better, digitally. Some sectors of the market will grow, while others falter. Location and configuration will be key
1980s style low-rise suburban business parks with parking spaces may have their time in the sun again, briefly, as people initially drive to work and avoid public transport, but such places always were terrifically boring, and I suspect this perception won’t change. The virus may prompt a linked trend towards low-rise suburban residential development, linked by roads and local rail. Good news perhaps for Milton Keynes and the Oxford-Cambridge Arc, but will this reverse the pull of London and other major cities as a place to work, as well as live, in the longer term? I would place a bet not.
This is not at all the end for the Central London office market. Skyscrapers in the City and Docklands that are hard to empty and fill quickly, and have no outside space, may have passed their peak. However, low-rise period offices in City fringe locations, accessible by stairs or short lifts, and with attractive features such as roof gardens and large bike stores, may become much sought after, as large professional service firms downsize and “homeshore” their staff a couple of days a week, and focus on a Central London hub for senior management. A drop in demand for space in London by existing occupiers will also enable regional professional services firms to have a small London presence. It used to be a sign of antiquity if you had to cool your London office by opening an actual window, as opposed to having air conditioning. Suddenly, that quaintness seems quite attractive again.
Mayfair will remain Mayfair, of course.
While people will be suspicious post-virus of co-working in the truly flexible sense, professionals visiting London and other cities less frequently than before, will need a space to log on and to host meetings. Private members’ clubs and business-related clubhouses, already of great interest pre-crisis for private equity, will become a growth sector as exclusivity offers by definition a limited range of interactions, and with the right people, and so the dividing line between personal and business networking will blur further.
Never underestimate the masterly power of inertia. Habits that don’t change immediately after a shock, tend not to change at all. Unless firms have an upcoming break or other looming lease event, it is likely that they will have settled back into something like the “old normal”, by the time they have to consider their next move. Most firms will want to use their existing assets, especially if they cannot be sublet or assigned easily. If it’s not over until the Head of Corporate’s karoake act at the office Christmas party, he’s still warming up.
This article first appeared in Estates Gazette on 10th July 2020.