While much of the UK continues to work from home, bigger cities like London, Manchester and Bristol continue to see people returning to the office in the wake of eased lockdown restrictions. But what does that mean for the market, and how will that impact workplace culture going forward?
The London Office Market
The London office market has taken a significant dive overall in Q1 2020, with many take-ups outside of London, around the M25, or further out, proving that there is still value to be had in commuter towns like Reading, Guildford and St. Albans. The market will surely continue to pick up as we return to our ‘new normal’ in the workplace, but the data suggests that we may see a lot more office space take-up and occupation outside of London entirely.
Why Invest Outside of London?
It’s simple, really. People are less keen to use public transport, and for a while, we may continue to see a decline in commercial investments around the capital. Nearly half of Q1 office space take-up was outside of London, and as time goes on, this trend will likely continue upward. As we see more and more businesses instituting work-from-home and flexi-working policies, commercial freeholds are open to short term pain. With London’s capacity operating at around 20 percent, there is an argument to be made that landlords only offering conventional leases for their freeholds will see a hit, and those investing in flexible office space will see a payoff sooner, and probably longer term.
Quick Analysis: How Fragile is London’s Market?
Well, if anything, COVID-19 has proved that London’s office market isn’t invincible.
It is likely that flexible office space will bear the burden of accommodating businesses in the short term. This is valuable time for landlords to re-evaluate strategy and look towards portfolio diversification. London’s market is fairly resilient, though, and is expected to pick up.
The Office Isn’t Going Anywhere
Let’s face it: the demand for traditional leases has been on the decline for some time, but that doesn’t mean that the office will suddenly become a thing of the past. Many polls suggest that people miss the infrastructure and culture that a bricks and mortar office space provides, but thanks to COVID-19, the way that we use these offices is likely to change. With a huge percentage of London’s workforce still taking advantage of the furlough scheme, businesses are looking to super flexible options to fulfill their needs. And while serviced offices and coworking spaces are at the forefront of this shift, landlords offering conventional leaseholds can still take full advantage of this trend. Offering reduced lease terms or license agreements, landlords are doing what they can to fill space. Office time-sharing could become more the norm for companies that wish to have more flexibility and help landlords cover their expenses.
What Does This Mean For the Future of London Office Space?
It’s an uncertain one, but just like after the 2008 financial crisis, London will rebuild and has the potential to become stronger than ever. This will only happen, though, if investors are willing to focus on innovation and take advantage of those gaps in the market.
While many firms like HSBC, Deloitte and Twitter completely adapting their employment policy to include permanent work from home options, it’s hard to say what the ‘new normal’ will look like. For many, it means staggered workdays, thermal imaging scanners at entrances and hand sanitizer at the ready. Some firms are taking notes from the service industry, with the use of plexiglass barriers, contact-free interactions and more. It is hoped that these innovations will help to pave the way for commercial landlords in mitigating risk for their occupiers.
But will this really be a permanent fix? Only time will tell, but landlords and tenants need to be ready for anything and everything.
If you’d like to have a conversation about the market, ask about investments or find office space of your own, call us for a conversation. We’re committed to being thought leaders in the industry, with years of experience and a network across the UK. Here at Office Mapper, we give you all the tools to get where you need to go.
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