The future is flexible: After WFH year, firms look at the role offices will play when lockdowns ease

One of the primary reasons real estate developers don’t appear to be panicking is that they don’t buy into the notion that everyone loves remote working.

Research from O2 Business identifies the new work-life personalities as the home dwellers, office cravers and the mixers in between, and its recent poll of 2,099 UK adults found that only 10 per cent want to go back to offices full time and 32 per cent do not want to go back at all. But that suggests there are plenty of “mixers” that want the best of both worlds.

Indeed, an Evening Standard poll of FTSE 100 businesses this month shows numerous chief executives are eyeing a more flexible working future. WPP’s Mark Read says the advertising giant “will never go back to working in the way we did before and our people will work more flexibly, in our offices, with our clients and from home”. David Sleath, who leads Segro, reckons the warehousing landlord has “learned from the pandemic that there are times when home working is more productive and suits the lifestyle of our people.”

As Karen McCormick, chief investment officer at Beringea, which backs a number of London start-ups, puts it, the pandemic “has led to the best commute ever. You never have to get out of leggings, and we can see more of our kids than ever before”. Not getting on the Tube saves money.

But, as McCormick also points out there are downsides, “particularly for younger employees who might be living, working and sleeping in the same room, grappling with loud flatmates, and finding their working day never has a formal start or end”.

Certainly, of the blue chip companies that responded to this paper’s survey and have London offices, several said there are no plans to reduce what they occupy in the next three years. “We want to give our colleagues the freedom to manage their own day-to-day working pattern,” says cyber-security group Avast’s chief people and culture officer Rebecca Grattan. “To choose where and when they work depending on individual situations and contexts, and so retaining our existing office space will still be important to us.”

Still, there is a reckoning under way. “Every business is running a near forensic eye over their space requirement,” Chris Lewis, head of occupier advisory at tenant advisers DeVono Cresa, explains. “They will be expecting to realise savings (space and cost) wherever possible.”

And this reckoning may force more of a cultural revolution. If firms shrink space, the landlords likely to lose out are those sitting on older stock, where desk areas are more cramped. In demand will be modern environmentally-friendly workspaces with good transport links, plenty of cycle parking, gyms on site, and fewer desk spaces and more room for meetings. Broker Peel Hunt this year relocated to a Liverpool Street office and praised the technology there, as well as a wellbeing room and auditorium to host client events.

“It’s definitely a benefit to have a cool office when attracting new team members,” agrees Emma Watkinson, the boss of Spitalfields-based online fashion retailer SilkFred. “I think offices in the future will need to have well thought out social spaces and meeting environments that promote collaboration.” She adds that “sitting in rows under strip lights in cramped spaces” will not attract people.

“The focus is very much on high quality, best-in-class space,” agrees Faisal Durrani, head of London commercial research at Knight Frank. “Not least because the quality of offices are increasingly being used in the war for talent, an issue that will transcend the pandemic.”

Meanwhile some big employers are looking at space that does not require them to commit to lengthy leases. Olly Olsen, co-chief executive of flexible offices provider The Office Group, says: “The proportion of our client list made up of corporates with over 10,000 employees has trebled in the past year, proving that flexible working is definitely no longer just the preserve of nimble start-ups.”

Co-working space could also be attractive in the suburbs, giving workers access to office space without having to commute. Zoe Ellis-Moore, founder of consultancy Spaces to Places, says the WFH movement “doesn’t nullify the office”, adding that “instead it’s a wake-up call to rethink it, having that London HQ for high-level business and socialisation aspect, followed by strategically-located satellite offices.”

Returning to the question of new-build offices in zone one, Knight Frank’s Durrani explains why some investors are prepared to start constructing buildings that may not be ready for years. “The fundamental challenge in London’s office landscape is a shortage of prime grade-A office stock; a lasting legacy from the global financial crisis.”

Demand for new stock will outweigh upcoming supply: a report in October from Jefferies said that of the 12 million square feet of London offices under construction, 60 per cent is taken, so “there is an emerging scarcity and the pre-letting market is expected to be brisk”.

Firms that have this year signed deals for new London bases include TikTok, the video sharing app, which is taking an 88,500 sq ft building above the Farringdon East Crossrail station. In addition, law firm Latham & Watkins has agreed a major pre-let for a City office it plans to occupy from 2026. But total lettings over the last year are still drastically lower than average.

Old office space is likely to come under pressure, and most people will not be back in the office nine to five every weekday. But expect to see more cranes as enough people, for now, remain convinced the HQ, and shiny new ones particularly, are still part of London business life.