Planning for Growth - Unlocking Your Real Estate Potential in 2021
This blog was written by Shaun Dawson
Office Market Predictions 2021 – a time for occupiers
2020 has left a mark on all of us and will be remembered as a year to ultimately forget. The COVID-19 pandemic has changed all our lives – including how and where we work. Whilst most of us may have felt like we were ‘on pause’ for much of the year, the workplace, workforce and associated working practices underwent a supercharged evolution.
If 2020 was about adapting to a ‘new normal’, 2021 will be about getting back into a routine. Yet, after a year of reflection and change, we believe 2021 will be a time for businesses to seize the mantle, and act. Each year, DeVono Cresa delivers a set of predictions for the year ahead. We will be launching a full-fledged version in our next edition of our quarterly publication ‘The Occupier,’ yet please find below a selection.
The office will be for purpose, not process
For many people, the office is central to the daily routine and business operations. At the end of March 2020, this perception changed, and pretty much overnight. The pandemic forced us to adopt new ways of working and interacting with colleagues and clients, with regularity, away from the office. The transition to remote-working, a move which for the most part has proved successful, had prompted some to suggest ‘the office was dead’. We do not believe this is the case. The office will continue to evolve as it has always done – delivering a space that is conducive to not just the workforce but the wider business strategy. 2020 has shifted our view of the office, yet we believe that it will become a place where workers will go with a purpose, rather than just as a process.
Our basic need to interact is an overriding driver for the return. Being face-to-face fosters conversations, decision-making and key relationships. The lines between our home and work lives have blurred so much in 2020, and for mental wellbeing alone, will see UK workers clamour for a return to the office.
Remote working however has shown that many mundane functions can be done just as well at home as they can be in the office. Some workers may even prefer to carry aspects of work requiring more concentration and fewer distractions at home than in the office. Ardent opponents of working from home now see its advantages. As such, we predict that as businesses reappraise their workplace and workforce in 2021, they will do so with an evolved appreciation of the office. This will, in turn, influence the type, use, location, and quantity of space deemed appropriate – thereby ensuring that the office will remain an integral function of a business.
Pick ‘n’ mix offices
The scrutiny placed on the office in 2020 has been immense. As more and more occupiers evaluate their office needs, we believe that businesses should entertain the full range of ‘office options’ on offer. This does not necessarily mean diverging away from the more traditional methods of acquiring space, but it does mean having a greater appreciation of all the component parts. One size no longer fits all.
Tenant calls for more flexibility within the market have been amplified in 2020. These have been heard by landlords, flexible office providers and property professionals. The downturn in the office leasing market and ensuing change in workplace needs will ensure that office offerings evolve, and at pace.
Whether a business with multiple sites or a start-up looking to grow, firms now have access to the widest set of options they have ever had. Said options can now be deployed to best fit the changing demands that both the pandemic and any subsequent recession may inflict. For some businesses, this could mean a central hub, albeit a smaller size, complemented with local offices, known as a ‘hub and spoke’ model. For others, it may well be the leasing of flexible office space for the whole or part of a business, which can be adjusted depending on the business’ growth phase.
The voice of the workforce, to get louder in 2021
Commercial real estate decisions were once the preserve of the C-suite. As our expectations of the office have expanded over the past few years, so has the grouping that feeds into those decisions – integrating HR, IT, and on occasion, the general workforce.
Increasingly office workers have been given a greater voice, helping to shape the workplace to meet their and the wider demands of the business. For some, the relationship with the office will have changed in 2021, especially those who been away for nearly all of 2020. Whilst some will be eager to return, many will be hesitant. It is expected that businesses will face a difficult task in 2021 to get people back to the office, certainly for five days a week.
Workforce wellbeing will be of paramount concern to business leaders in 2021. Taking on board the views and opinions of the wider staff base will help to create an environment that is not only productive but happy and safe too. Ill-informed and rushed decisions at this juncture will have a lasting impact on the business and the workforce. Promoting workforce inclusivity is pivotal for an organisation’s agility and a shared sense of togetherness.
Tomorrow’s office deal, today!
A squeeze on cash-flow, underutilised workspace, and a successful and positive adjustment to remote working are just a few of the factors that led many businesses to cancel or defer property decisions in 2020. Rightly so, companies went into survival mode meaning that property searches and negotiations on new space was far from a priority. However, pushing those requirements further out will mean that some occupiers have looming deadlines, lease expiries or break options.
Of course, not each lease expiry will translate into a deal on a new space, and not all break options will be exercised. Yet the timing of these lease events should at least spur on businesses to reassess their requirements, as will the start of the new year. Having had close to a year of experimenting with remote working, distanced collaboration with colleagues, and adapting to new working practices, many commercial real estate requirements will have shifted and should be factored in and aligned to the wider business strategy.
Pent-up demand could see a larger number of businesses than usual vying for a similar quality and type of space. Some occupiers with active searches have already found the level of difficulty increased in matching needs with existing options – widening the tenant pool will further pressurise decisions.
We believe that a window of opportunity has opened for businesses who not only have imminent space needs but also for those who have longer-term requirements. Securing a preferred option at today’s preferential rates (rent and incentives) for space that is not needed for another six months, one year or even several years away could be significantly beneficial for all parties.
Rethinking office design – time to put it into practice
Workplace design also continually shifts, adapting to the times and the needs of a business while being heavily influenced by technological advances, demographic change, a shift in working practices, or even access to new materials. The ability to design a space for the now, and for it still be relevant in five-years-time, is challenging. Architects, developers and the task of designers is made all the more difficult by not only achieving a greater level of sustainability in projects, but also factoring-in lessons learnt from the pandemic. As businesses and the real estate industry plan for the post-COVID return to the office, these design principles need to be put into practice.
In 2021, we expect to see office design, and not just the aesthetics, to rise in prominence with occupiers. The bare bones of a space, such as ventilation, windows, light, or even the access points, will be key considerations. Whether it is retrofitting an existing space or fitting out a brand-new building, expectations from business will be higher.
We will be launching our full set of predictions in the coming weeks. Please make sure that you are signed up to receive our report. The journey from 2020 to 2021 has not been smooth, with next year also not likely to be plain sailing. We hope that with our support and insights inform your property decisions. We can weather any storm ahead – together.
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