Valuations of UK offices have drifted lower over the past year, to a point where they now trail many other European countries despite the universal impact of the pandemic.
Fuelled by the relative speed and ease with which office workers adopted home working, uncertainty continues to cast a shadow over the sector.
For investors attempting to understand the lasting impact of Covid on office use in the UK, they must learn to decipher how a combination of structural changes brought about by the pandemic, together with the effects from Brexit and advances in technology, are going to change our behaviour and working practices.
Owning office assets is all about having the right assets that occupiers want to work in. This means being able to correctly predict what a post-Covid workplace looks like in terms of location and specification, including sustainability credentials. Getting this right will differentiate the winners from the losers.
Will we return to the office post-pandemic?
It is unlikely that the benefits brought by working from home – improved work-life balance, increased flexibility and a massive reduction in time spent travelling – will be surrendered entirely.
A reasonable assumption to make is that most companies which had not already, will introduce hybrid models of home and office-based working, depending on job roles and other factors.
Surveys of office workers carried out at different times during the pandemic support this hypothesis. It has been interesting to see the rhetoric change during the year from “we are loving working from home” to “I need to get out of the house”.
CBRE polled a group of office occupiers periodically during lockdown and found that 67% of occupiers anticipate that all employees will have access to an office by mid-2021.
They also found that 81% of those surveyed expect at least half of their workforce to be ‘office-based’ in the future and 73% will support previously office-based employees to balance their time between office, home and other locations.
How we use the office is going to change
While much of the evidence currently suggests the office is here to stay, we are likely to see significant changes in how we use office space.
Increased balance between home working and office-based working will reduce seating density, creating an opportunity for companies to make their offices more appealing through a number of measures.
Proptech and smart building technology is allowing landlords and occupiers to manage their space much better. With improved insight into how their existing space is being used, they will be able to cope with fluctuations in capacity more efficiently and predict how many workers might be in the office on any given day.
For some, lower density will allow them to increase the amount of collaborative space with more meeting rooms and breakout areas.
There will be much greater emphasis placed on developing a building’s wellness characteristics with a view to making them more attractive workplaces where employees will want to work and collaborate with colleagues.