UK Government Documents Reveal Office Market's New Normal
Leaked UK government options documents, prepared ahead of the lockdown easing rescheduled for 19 July, said that working from home will still be encouraged, and offices will be required to meet new workplace ventilation standards.
The roadmap suggests that even after 19 July the government is considering not actively telling people to go back to the workplace, Playbook said.
Ministers are being advised to encourage hybrid working, mixing working from home with a cautious return to work for some (but not all) workers. There will be no legal bar to working from the office, but the government will encourage working from home, and may provide more support.
Playbook said that the proposal was likely to encounter stiff resistance within government.
The government is also being advised to introduce new standards for minimum workplace ventilation. This represents a belated acknowledgment that Covid-19 is an airborne virus, and that the heavy emphasis on hand sanitising in the workplace is less relevant.
For similar reasons, plastic screens are not encouraged in the newly leaked paperwork: They do not prevent aerosol transmission and may make it worse by interrupting airflows.
Asked to comment, the Cabinet Office said no decisions had been taken.
Immediate office market reaction was to shrug off the idea that the direction of government thinking represented a challenge to their business plans.
“I don’t think [the government’s hybrid working proposal] is a problem at all. They are offering office occupiers a choice, rather than being prescriptive, and it is now up to employers and landlords to encourage people to want to go back to work, and that is very positive,” CBRE Global Investors Head of European Offices John Mulqueen told Bisnow.
“Aggregate office demand may reduce, but that will increase the market’s concentration on the best space, which will be the most sought-after, and is in short supply.
“This may be the point where I’m deluding myself, but in the office market I don’t think there will be a significant drop in floorspace required.”
Offices were already empty for two days a week — Saturdays and Sundays — and a cultural adjustment would make it seem reasonable for them to be less than fully occupied on Mondays and Fridays too, he predicted.
Mulqueen was also sanguine about the costs of meeting improved ventilation requirements.
“There will be the best, and the rest, and the ‘rest’ will have a future but it will involve capital expenditure to upgrade it, but I believe that will be worthwhile, I don’t think rents will fall through the floor, so yields will hold, making the investment in ventilation viable,” Mulqueen said.
“Good design in new build can mitigate the additional costs of ventilation. In older buildings, they were built when we’d seal windows and have chemical ventilation, and recirculate 60% of your air for good energy-efficiency reasons. Now we’ve learned you need to bring in fresh air, use it once, and get it out again. Purging the air like that requires more plant because you have to treat all the air all the time, but we are now starting to see design take in natural ventilation.”
Mulqueen said the additional cost was “material but not catastrophic” so long as office building valuations held, and that most ventilation systems installed in the past 20 years would be capable of meeting new standards.
Smart Spaces director Matthew O’Halloran agreed that improving ventilation standards will not be burdensome for most landlords. “So long as they have a smart operating platform they will be able to optimise," he said. "Maybe both hardware and software will need upgrades but you can go back [to plant installed] 10-12 years before you would need to seriously consider investing in buildings, providing you have smart enablement.”
Smart Spaces, whose tech now powers 20M SF of UK real estate, works for clients including Axa Investment Management – Real Assets, McKay Securities, Aberdeen Standard Investments, Columbia Threadneedle and Great Portland Estates. The firm is creating tech that helps to monitor and control indoor air quality.