he pandemic has altered the way we work, but property investors and analysts say Covid-19 only accelerated what many already knew: hybrid working is the future.
Record numbers of staff shifted to homeworking, according to the Office for National Statistics. While employees have begun returning to offices, city commuting remains a shadow of what it was, with the number of rush hour rail journeys in the UK still just a third of the 2019 figure according to industry body the Rail Delivery Group, displacing an estimated £30bn in annual expenditure.
Flexible working is now ‘a genie that can’t be put back into the lamp’, according to Oliver Creasey, head of property research at Quilter Cheviot. His sentiments are echoed by several analysts and investors, who suspect this trend will have an unpredictable impact on how urban space is utilised.
So how will UK real estate respond to the long-term change in tenant demand, and how can UK funds profit from the changing face of our cities?
A flight to quality
While the past 18 months has shown many employers that staff can work effectively online, the big question remains: can employees be lured back under one roof?
‘The big step change has been the need to make an office a magnet for people to come and work and make it different to the home,’ James Vivian, a director in the UK investment team at Savills, said.
Reconfiguring space for greater team collaboration and better-planned common areas will prove critical, said Victoria Goodings, head of UK workplace strategy at BNP Paribas Real Estate. She also highlighted added extras like gyms, cafeterias and lounge areas.
Creasey said many premium inner-city office developments – which have largely held their value through the pandemic – already recognised the need for leisure and social pursuits in their development plans. Older and less-flexible spaces will suffer, however.
A two-tier market was already evident in Savills’ rental data, with premium office space being leased at an average of £73.27 a square foot in July, up 20% from £60.77 in May. Tertiary rents dropped by almost 7% over the same period, from £58.85 to £54.94.
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