Death By A Thousand Cuts
Bloom, Barrero and Davis’ Stanford survey found that even if staff are spending 30% less time in the office, companies are not cutting space by the equivalent amount — the companies surveyed have cut space by just 2% on average.
That is because companies are de-densifying the office, they argued. People don’t like being packed into a small amount of space anymore. Most people are coming in on Tuesdays, Wednesdays and Thursdays, so on those days you still need enough space to fit all your full staff. And more room is needed for collaborative workspace.
It is worth pointing out that we are still in the early days of the move to hybrid work, and space could be cut further down the line. Even with work-from-home restrictions lifted, London office occupancy in terms of workers in the office was just 23% at the end of January. If that were prolonged, companies could start deciding to cut back on office space.
“You read a lot of headlines about people being desperate to get back to the office,” RealCorp Capital founder Chris Kanwei said. “But the City of London is empty right now.”
Kanwei pointed out that the current technology surrounding working from home will also improve, which might reduce the need for in-person office work.
“If you look at advances in technology and where VC money is flowing, that technology is going to improve dramatically in the coming years," he said. "As virtual reality technology improves, remote collaboration will improve, and younger workers will be the quickest adopters of these tools.”
So, your tenant decides at renewal it wants to halve the amount of space it takes and expects you to contribute to refurbishing its existing space. Its staff are going to work three days in the office and the rest of the time remotely. You’ve now got half a building to re-let. What is your leasing strategy?
If you look for long-term tenants on traditional leases, click here.
If you go down the flex route, click here.
But there is something else to consider.
The fact that half of your tenant's staff won’t be coming into the office every day gets you thinking, will they all want to work from home? Maybe they just want an office a bit nearer to home to reduce their commute. What if you bought an office, or even a series of offices, in the suburbs around the city, to exploit the potential for a hub-and-spoke model. To explore this option, click here.
Don't like where you've ended up? Start over!