The reinvention, not relegation, of real estate
“Once more unto the breach dear friends, once more” – but it’s Boris not Shakespeare telling us to hunker down and work from home ‘one more time’ in some sort of Daft Punk rhetoric. He describes parts of this third UK Lockdown as a sprint to the finish line not a marathon, as a vaccination programme is rolled out across the country. But for many it feels ominous – just at a time when there is quite some excitement and anticipation within the #Londonofficemarket.
A most ingenious paradox is upon us, as fabulous technology rises to meet the challenge left by surplus, obsolete and covid-abandoned office space, the perceived benefits of working from home wear thinner with every lockdown and a growing commercial appetite from developers, investors and indeed occupiers is setting a new trend – and in some cases new rental records – across the City. Whilst many of us have been focused on the digital employee experience, our PM expects a bounce-back as workers return to their offices – and others believe in this too.
The most agile property firms – those that speculatively invested into well located, modern architecture, advanced construction techniques and building technologies – are reaping the rewards of marketing a more appealing workplace and from the evidence of this week’s record rents at the @CheesegraterLdn it’s becoming clearer what firms are prepared to do (and pay) to keep their employees happy.
Although investment into central London property fell by a reported £3.9 billion last year (@CBRE), there is pent-up demand to buy into the sector that can still deliver attractive yields – especially now that there is an established vaccine programme and finally the Brexit debacle is off the table. Seeing contracts such as Skanska’s to build @BritishLandPLC‘s @BlossomStreetE1 project which includes 46,300m2 of commercial, retail, public realm and residential units (in London’s tech heartland) indicates a degree of optimism as firms consider their future workplaces. Innovation in the workplace is thankfully not a #Covidtrend (yes yes, albeit accelerated as we all know) – and there are some wonderful and well-established projects and case out there if you take a look. The office is not dead.
The office is the nucleus of a firm’s culture and camaraderie – it’s difficult to deny – especially for larger corporates. But agile workers are proving that a hybrid or blended work programme suits them best in a variety of ways – and the technology is there to support it. This will suit some industries more than others. @JLL has launched a hybrid working technology ‘JET’ to accelerate the transition into more of a blended working environment – and this seems to be perfect timing.
For those who say that the office is dead and demand has withered (and it is healthy to see this debated in the property media) one has to consider the alternatives. Without a common meeting place or destination for workers, do we really want a future of digital nomads sitting at home alone, bathed in blue light – or will an alternative nucleus’ or more ‘third spaces’ spring up in the commuter belts? What we’re essentially describing here is the reinvention, not relegation, of place – just in the same way this has happened countless times through history. Flexible working applies to the real estate too, and the ubiquitous phrase ‘space as a service’ rings loud in many a boardroom.
The office is still the physical embodiment of a business, where employees generate ideas and share innovations and thoughts on achieving better results. 3 days in the office 2 at home seems to be the average we’re hearing around the corridors at Innesco. And if this has no impact on performance, creativity or output – or perhaps even improves things and employees get the job done – then why not?
Last but not least we musn’t forget the other ingredients of place – as we can’t lay all the responsibility on the office’s shoulders. The Arts, Culture, Retail, Entertainment, Leisure, Residential all play their component parts in making a location really tick and from a CRE perspective of course adds significant value and covenant. In turn this triggers the debate over public-private partnerships to regenerate mixed-use spaces, not just workplaces, as emphasised in the recent @Milligan report – so we expect to see more on this during 2021.
This period is all about its reinvention, and will pivot on understanding and anticipating consumer (occupier) wants and needs.
Dan Innes. Founder & MD. InnescoGo back to category