‘Death of the office’ predictions greatly exaggerated
A close observer of Birmingham office space has dismissed predictions that urban office markets will be changed forever by the COVID-19 pandemic.
Some pundits believe transformation lies ahead, and that the ‘new normal’ will be unlike anything previously seen, as occupiers switch to remote working in their droves.
However, John Bryce, Director and co-founder of Birmingham’s largest independent property agency, KWB, considers such talk is overdone.
“I’ve been working in this industry for 40 years, and it’s certainly not the first occasion when the market has been brought to its knees but, however much economic damage is wrought in the short-term, I don’t believe the fundamentals will have changed once lockdown fully ends,” he says.
How is the situation likely to play out for Birmingham office space?
“Inevitably, very few people are currently inquiring about office space and existing tenants are seeking to renegotiate their lease terms and conditions, and of course the serviced office sector has been very badly hit.
“We’ve already seen the market leaders, WeWork, sue Japan’s SoftBank for pulling out of a $3bn deal to take full control of its business, and others in that sector are having ‘conversations’ with their landlords for either deferrals or holidays for rent and service charges.”
John thinks that, as business models evolve during lockdown, some tenants in traditional office space are likely to dedicate their meeting rooms and conference suites to office use to achieve better social distancing.
“Serviced operators could then also benefit from letting out their meeting rooms, on an hourly basis, to these traditional office users whilst their own meeting rooms are out of action,” he says.
Example of a WeWork lounge area illustrating where people can sit under new social distancing measures (image courtesy of WeWork).
So, what is the future for Birmingham office space, now that so many are working from home?
Although the KWB team has become avid users of Teams and other video-conferencing apps during lockdown, John does not expect that remote working will replace traditional office environments when the crisis ends.
“There’s no doubt that some companies looking to reduce their overheads, because their finances have been crippled during lockdown, will in future make greater use of technology, and that some of their employees will continue working from home,” he suggests.
“Equally, we’ve seen times when home working has been particularly in vogue, but then the appeal of working in a traditional office resurfaces.
Never underestimate the value of office space to a business
“To me, an office provides a collaborative environment, and helps organisations and employers deliver a sense of unity and purpose, which is inevitably missing from a home office.
“We will certainly see occupiers in traditional office space seeking increased flexibility in their leases, allowing them to reduce their overheads more quickly in the event of future recessions, and landlords can expect to see lease break demands to be more frequent.
“Naturally, they will want to resist such changes, as it will affect the investment value of their properties, but if they want to compete with the serviced office world, then more flexibility is something they will need to swallow.”
Will serviced office operators recover?
After the crisis, John accepts that demand will tumble for serviced offices in the short-term, as potential occupiers rebuild their finances, but is convinced that the sector’s ability to supply high quality office space and ICT, and on short-term leases, will see it steadily recover.
“I suspect, too, that the serviced office sector will attract tenants from traditional space, especially if landlords are unwilling to accept occupiers’ needs for greater flexibility,” he says.
“Across the piece though, and regretfully some businesses will fail to survive, I see changes ahead for our office markets, but certainly neither the catastrophe, nor the cataclysmic changes, which some are forecasting.”
For more information about the office market in Birmingham or Solihull and the M42 corridor, please contact John Bryce on 0121 233 2330 or firstname.lastname@example.org.