The End of an Era? Maybe Yes, Maybe No. You Decide.

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There’s an economist at Stanford University in California called Nick Bloom. Like the rest of us, he’s working from home for the foreseeable future on high end economics-based work which, we imagine, requires deep thought and serious concentration.

The trouble is that his 4-year-old daughter interrupts him every half an hour asking him if he can come out to play and his two older children, courtesy of gifts from their maternal Scottish grandparents, are self-learning the bagpipes.

For Nick Bloom, working from home isn’t great. The irony to this particular story is that in 2015, he published a report that found that Chinese call-centre employees who worked from home were 13% more productive than employees in a control group, because they took fewer breaks and made more calls per minute. They were also happier and were less likely to quit their job.

Which got us thinking…

Is This The End Of The Office As We Know It?

 

The Case For…

Whether we like it or not, the vast majority of us will have to embrace the buzz-phrase of 2020 – a new normal.

Very few of us have seen our desks for the thick end of two months but when the lockdown eases, there may be fewer desks to return to, so says an article in ft.com.

‘The notion of putting 7,000 people in a building may be a thing of the past’

Jes Staley, Group CEO, Barclays

 

Across almost every industry sector, businesses large and small have faced a sudden requirement to cut costs wherever possible. It appears that the decision makers are indicating that their property portfolios are good places to start due to the fact that setting a workforce up remotely is, as it turns out, relatively straightforward.

Dirk van der Put, Chairman and CEO of Mondelez International, the umbrella company that owns brands such as Nabisco, Oreo, Ritz, Cadbury, Toblerone, Milka and Trident Gum and who employ almost 90,000 people mused that ‘maybe we don’t need all the offices we have around the world’. Sergio Ermotti, the outgoing CEO of UBS (with 70,000 staff) is considering moving out of expensive city-centre office space.

In the space of eight short weeks (even though for some it feels more like 8,000 years), we have, as one, moved businesses out of the corporate environment and into spare bedrooms, living rooms and kitchens and for the majority it’s been pretty seamless.

Kids and dogs wandering into shot during video meetings has very quickly become an accepted and often embraced part of our day. People are getting used to it. No-one cares. Admit it, you also wear a visible business shirt with unseen pyjama bottoms…

As well as employees embracing home working, a growing number of CEOs are also making the case for the need for less space.

Jim Collins, CEO of $20 billion biotech and agriscience company Corteva said that he has ‘been so much more connected to 20,000 employees in the last six weeks’ than he has in the previous six months. Salil Parekh, MD and CEO of Indian tech behemoth Infosys who have almost a quarter of a million people on the payroll sees little need for his staff to rush back, predicting that many would remain working from home on a permanent basis.

 

Michael Silver, chairman of Chicago-based property consultancy Vestian thinks that there will be drastic changes. ‘There will be staggered returns to work with offices only 50% occupied to guarantee distance; you can’t hit a lift button, you can’t touch a door, you can’t share the same coffee pot…there needs to be a whole new protocol regarding the return to a safe and healthy workspace.’

 

How do you get the City back up and running if only one person at a time is allowed to use a lift? London’s skyline (and economy) has been transformed with billions of pounds’ worth of state-of-the-art buildings which are, unfortunately, simply not compatible for combating the challenges that Covid-19 has presented us.

The Case Against…

 

Everyone’s experiences of working from home will be different. Some have embraced it and some have abhorred it and while it’s rather twee looking at LinkedIn posts of people uploading pictures of 20 people on a screen-share, remote working really is no substitute for face-to-face business, is it?

It’s at this point we turn to Betteridge’s Law of Headlines which declares that ‘any headline that ends with a question mark can be answered with the word ‘no’.

So no, it is no substitute for face-to-face business. People still need offices to work in. Being in the office (and going out for a sandwich, meeting clients and friends for a lunchtime drink and the like) dramatically reduces the opportunity for chance encounters with potential, informal water cooler chat that spawns an idea or productive exchanges that can seal a deal.

It’s also worth reminding ourselves that the demise of the traditional office has been predicted by ‘experts’ for forty years, albeit never under such unusual circumstances.

As quickly as we’ve settled into a new way of working, we will be able to revert back to how we did it before but with the added bonus of knowing that Zoom, WhatsApp, even Google Hangouts can dramatically improve communication and will push us towards a genuine culture of agile working, i.e. maximising the time we can spend with our families and minimising our reliance on email.

As Michael Silver said above, there will undoubtedly be drastic changes that will have to be made to the practical way of working, including social distancing measures but it remains clear that office space is needed by companies of all sizes, in one form or another.

Scott Stephenson, Chairman, President and CEO of Verisk Analytics is wary of predictions that the traditional office as we know it is about to fundamentally change. ‘Individuals may spend fewer days in the office because they like having no commute, but the other thing that we’re learning is that people do like going into the office. The workplace is one of their important communities, so there has to be a balance.’

 

Oner supposition is that in the future (whenever that may be), occupiers will prefer to take a smaller amount of ‘better’ space as an inevitable result of more of their staff working remotely. As demand evolves, so will the built environment. One cannot happen without the other.

But what does ‘better’ space mean? To us, it’s a two-fold issue. First it means that our (the market’s) over-arching obsession with physical property over all else is now facing a paradigm shift in attitude and second, we postulate that it means more future-proofed, sustainable (green) construction that embraces a new wave of flexible working practices and at the same time positively encouraging collaboration and wellbeing in all its guises.

Dr Dror Poleg, an economic historian and Co-Chair of the Urban Land Institute’s Technology and Innovation Council in New York said recently that in the hotel sector a lender will consider a well located city-centre asset as worthless without the right branded operator, whereas in the commercial agency sector the relevance of, and the quality of service provided by, the operator (landlord) is generally considered subservient to the quality of the building itself.

There are clear and obvious challenges facing businesses and net-absorption in the medium term but the notion that central London office space will be somehow rendered redundant is preposterous.

Along with many others, we are in an industry – regardless of the direction it takes in the future – that relies heavily on face-to-face contact and being able to view physical space. While working from home has been forced upon us, even the most militant home worker will concede that it can’t last forever and that the long-term value of the office is critical for collaboration, team cohesiveness and innovation.

There is also the elephant in the room to consider – mental health, a challenging issue for businesses at the best of times. There are a lack of social outlets (and lest we forget that office colleagues are for some the only social interaction people have), feelings of isolation and the practical position that for younger employees in small flats, accommodation is not suited at all to working from home. Many having to resort to a laptop literally on the lap.

Notwithstanding any of that, do any of us have a chair that’s as comfortable as the one we have in the office?

Market Responses

To quote the estimable Ian Dowie, the commercial property market has demonstrated time and time again that it has ‘bouncebackability’.

Any market responds to the needs of its users and we are no different. We’ve already seen the rise of the serviced or flexible office sector – known as the WeWork model – and the call for shorter, more flexible leases that hedge against future ‘shocks to the system’. As we said, ‘experts’ have predicted the demise of the office for years – when email became the norm, when mobile communication became the norm and latterly after 9/11 and the Brexit referendum – and it’s fair to say that the role of the office changed but the need for the office didn’t.

What we need our offices to do will change. It may be that we no longer pack ourselves in. It may be that we’ll divide our time between the office and the home. It may be that the traditional 9-5 will become redundant and these factors (along with many more that have emerged during this period of unusualness) will most certainly have an impact of future building design, but that’s a blog topic for another time.

Like the Mondelez and UBS head honchos said, their property occupancy strategies will be reviewed, portfolios will be assessed and the risk, costs and benefits of occupying such prime, expensive space will be balanced.

The status quo has been upset so it’s only right that we brace ourselves for a response.

We’re central London office agents, of course we don’t think that the age of the office is at an end so we believe this is a balanced view rather than just protectionism. What we have to consider is that things are unlikely to be the same as they once were and like everyone else, we’ll have to adapt.

In what ways and for how long, who knows?

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