The dining table, a plank of wood across boxes in a spare room, a wallpapering table in the shed, this time four years ago our ad hoc Covid-prompted office set-up had us questioning the importance of a traditional office space as “WFH” became common lingo.
Since then we’ve seen a significant transformation in the office environment, encompassing some key concepts and changing the central role of office space in the UK, with some significant implications for the real estate market:
Where do we work? Office, WFH, Hybrid
While some companies already embraced a degree of flexibility pre-pandemic, Covid accelerated a shift towards more frequent remote work. Many businesses have now settled on a hybrid model, allowing employees to better balance work and personal life. Employees enjoy the reduction in commuting time that being at home provides while also valuing the time spent with colleagues in person, and it’s the latter which indicates a continued importance of a physical workplace, albeit perhaps “not as we know it”. Our employment specialists have written about what hybrid working means from an employer’s perspective and what you need to consider when looking to monitor hybrid/home workers.
Reduced demand for office space
As more companies adopt remote and hybrid working models, the demand for traditional office space is decreasing. This shift may lead to an oversupply of office buildings, causing rental prices to drop and potentially leading to higher vacancy rates. Real estate investors may need to adjust their strategies, focusing more on sectors that are likely to grow (which commentary suggests could include logistics, data centres, and perhaps even residential properties). Diversifying portfolios to include these asset classes could mitigate risks associated with the declining office market.
Demand for flexible workspaces
The demand for more flexible office solutions, such as serviced offices and co-working spaces – with open plan layouts and hot desking – has risen. The design of office spaces is evolving to meet new demands and in new locations. These spaces offer the flexibility that companies need in an uncertain economic environment, allowing for short-term leases and adaptable office arrangements.
Demand for better workplaces – more than plants
There is a growing focus on the health and wellbeing of employees. Offices are incorporating more natural light, plants and ergonomic furniture. Companies are also providing wellness programmes, mental health support, and creating spaces for relaxation and mindfulness. While it’s well-documented that plants in the workplace can increase creativity, wellbeing and productivity, expectations around office space go far beyond a token yucca. Biophilic design – which takes its cues from the natural world to enhance the experience of its occupants – is becoming more popular and there’s a greater demand for more attractive and comfortable workplaces with a host of amenities, a trend which some have termed the “hotelisation of the workplace”.
A focus on sustainability
Sustainable practices are also becoming a priority in office design and operations. Energy-efficient buildings, recycling programs, and the use of sustainable materials are just some of the measures being adopted to reduce the environmental footprint. Climate change, pandemic, innovation, focus on mental well-being are drivers for the adoption of biophilic design, proving its impact goes beyond only aesthetic qualities. Green infrastructure can help decrease CO2 emissions, boost the biodiversity of plants and wildlife and even regulate the temperature of buildings.
Technological integration
There is greater reliance on technology to facilitate collaboration and productivity. Tools like Zoom, Slack, Microsoft Teams, and project management software have become essential to ensure seamless communication in a virtual world. Advanced technologies such as AI, VR, and AR are also being integrated to create more interactive and efficient workspaces. Buildings that remain as office space may need significant technological upgrades to accommodate hybrid working models. This could include improved IT infrastructure, enhanced video conferencing facilities, and other amenities that support a flexible workforce. The greater focus on sustainability may require means of data collection to help better understand the way buildings are used and track their environmental impact. “Smart buildings” are becoming more popular, equipped with technology which seeks to track usage and optimise the efficiency of resources for the benefit of occupants.
Culture and community
With remote and hybrid work, maintaining a strong company culture and sense of community is crucial. Virtual team-building activities, regular check-ins, and creating opportunities for social interaction help foster a sense of connection among employees. Surveys have found that staying connected to peers is highlighted as one of the greatest concerns about hybrid work, and to be one of the main benefits of in-person working. This suggests that the office still has a central role.
Repurposing and redevelopment
With less demand for office space, property owners and developers may look to repurpose office buildings for alternative uses. This could include converting offices into residential units, co-working spaces, or mixed-use developments that combine living, working, and leisure spaces. While the reduction in commuting may contribute to lower carbon emissions, the environmental impact of converting redundant office space should also be considered.
Impact on city centres and “the commuter economy”
The decline in office occupancy as a result of Covid greatly impacted city centres as less commuting resulted in reduced footfall and fewer visitors to local businesses, such as cafes, restaurants, and retail stores. This naturally had an effect on commercial real estate in these areas, with changes in demand and therefore rental levels. The current sentiment is that the widespread move to a hybrid model, and the changing nature of workplace solutions which have sprung up as a result of this (think “co-working spaces and the like”) is likely to result in an increased interest in remote workspaces in commuter belt towns from which people may have traditionally travelled into London or other large regional cities, resulting in a greater presence in local town centres. This in turn will improve the locality and may have a positive impact on the high street, the death of which has been lamented at length in commentary over the past few years.
Effect on real estate
The phrase “the office, but not as we know it” encapsulates the dynamic changes reshaping where and how we work. It highlights the move towards more flexible, tech-driven, and employee-centric work environments, reflecting a broader shift in work culture and expectations which has a natural – but not entirely negative – knock-on effect for real estate.
If you are looking to change the way you occupy your property – for example, by repurposing, offloading surplus space or carrying out alterations – call our Commercial Property team who can assist with advice on the legal process to follow and any documentation needed. Our Employment specialists would also be happy to discuss any requirements around appropriate flexible work policies and employer obligations.