02 March 2021

Just how will the future workplace look and function? Technology has enabled the white-collar economy to be run from a million kitchen tables and while that does not have to bring about the death of the office, it surely cannot be designed to function in the way it did before. Amid so much uncertainty, there is only one thing we can be sure of: things will never be the same again. The question is: what happens next? What are the challenges? Where are the opportunities? And how will we connect, create and communicate at work? To help answer those questions, and more, Office Principles۪ joint regional managing director, Tina Batham, hosted a panel of industry experts featuring Theo Holmes, director, CBRE; Martin Silvestor, global director at Arcadis; and Aegon co-fund manager, Richard Peacock. Birth of a better office What is striking, at least in Theo Holmes۪ home city of Birmingham, is that we aren۪t seeing floods of space coming back on to the market. A really balanced supply۝ is how he terms it. And, whilst the number of deals confirmed in the Second City last year may have been down roughly a third on the levels historically witnessed in the previous decade, this has to be considered a relatively good result considering the freak conditions we۪ve endured. With the wider rollout of the coronavirus vaccine, enquiries are beginning to pick up. The prediction is of a market with a greater frequency of deals and an increase in rents. Speed of delivery is going to be key,۝ says Theo. Getting spaces fully connected and removing arduous agreements. But it۪s tricky to do this work speculatively, both in figuring out how much space will be needed by occupiers and how to price it.۝ An added conundrum for Theo۪s investor clients is how to approach the fit out of their buildings. In last year۪s Tomorrow۪s Office report, CBRE revealed a growing thirst for office amenities; more than 92% of respondents cited flexibility as being the most in-demand factor. The report also suggested a move to more shared space, as well as digital technology to create safer and healthier workspaces. So how will that look in practice? The answer appears to be hospitality or event inspired spaces. There is a real trend for amenity space at the moment, by landlords who are raising the bar of their offering,۝ says Theo. We۪re seeing the likes of gyms, coffee shops and meeting room space and we۪re going to see more activity based working environments too, with office-based fluidity and non-dedicated seating. We are also likely to see a rise in Zoom rooms and quiet zones and the ability to scale up and scale down through furniture solutions. Remote working is impacting innovation and pipeline developments, so a team-based neighbourhood design is likely to emerge, which will drive collaborative working. I think Covid will be the birth of a better office.۝ Working only from home is dead. Long live the office. While much of the attention has been placed on the supposed death of the office۪, a more pertinent question may be whether we are about to see the end of exclusive working from home۪ arrangements. Theo Holmes certainly thinks that may be the case. He says: Whilst remote working has worked well because of our advancements in IT, actually it۪s only really been successful because of the values, relationships and IP that the office environment has created. The WFH model is beginning to fray as those relationships spawned in office environments are eroding. It really comes down to a balance between working flexibly but with structure. The office works when people are there and engaged with each other. Whilst I can eat at home it۪s better in a restaurant. Whilst I can drink at home it۪s better in a pub. And whilst I can work from home, it۪s better in an office.۝ There is a school of thought that says collaborative office space will require less square feet than a traditional open plan office. That remains to be seen. What is certain, is that offices need to be increasingly well designed and thought through. That۪s the case in London, where Office Principles is working closely with Martin Silvester to deliver the new offices of global design, engineering and management consulting company, Arcadis. Workplace matters at Arcadis. It affects some 28,000 people across 3m sq ft in more than 70 countries. An incredible challenge۝, is how Martin Silverster describes the last eleven months. But there are several positives to have emerged. Covid has accelerated the pace of change and presented all occupiers with the opportunity to do something different,۝ says Martin. We know that we۪re a people and client focused business and you can't do that totally remotely. Going forward, that isn۪t the solution. The office has a huge role to play in employee engagement and talent retention, as well as collaboration with clients.۝ Data driven decision making Arcadis has sought the opinions of its employees to influence the decisions it makes on working practices and the designs of its workplaces. That has meant frequently surveying people and running internal focus groups to gather powerful data. The response is clear: they want a mix of office and home working. It has led to the development of a workplace promise۪, based on inclusive offices that promote the health and wellbeing of Arcadis employees. Our people have generally been happy working from home,۝ explains Martin, they۪ve enjoyed elements to it but the boredom factor is coming in. People have asked me how I keep my energy up when working from home. Some days I run from my kitchen to the office, other days I take a slow walk. That۪s where we۪ve got to and it can۪t go on forever!۝ As part of the promise۪ Arcadis offices are embracing a culture of trust between working from home and meeting colleagues and clients in an office environment. The business is also adopting strong carbon footprint targets to push boundaries and create something new and innovative that embraces intelligent building design. It۪s an approach that necessitates an investment in technology and effective space management. Martin believes that implementing this level of workplace change starts with culture - hybrid or remote. Upskilling managers and making them better at driving remote working cultures will be critical to business success. And there is a huge change plan around doing that successfully. He says: As our CFO put it, we don۪t need to offer our people less, we need to offer our people something different۪. And this is completely different to what we had before. We۪re all going to take space out but it won۪t lessen people۪s attachment to the office. We will have to find that balance between focused solo work at home and collaboration in repurposed offices, where our people will become familiar with the possibility that they can۪t go into the office today because it۪s full. We۪re not going to be able to do that by just dropping an App on someone۪s phone. We۪re going to need more planning on how we use our office space and that will be done by design.۝ Keeping the customer satisfied One man keeping a close eye on the demands of occupiers such as Arcadis, is Richard Peacock, co-fund manager at Aegon. It۪s an unquestionably challenging time for landlords. Office buildings, by their very nature, are fixed assets, generally inflexible, with huge embedded costs. And as Richard explains, any changes made to an office building, must have an economic justification. An awful lot of the commercial property around the UK is owned by pension funds and other institutions and is there to deliver an outcome for investors, so there is always an economic test,۝ he says. "But I don۪t think it۪s the buildings themselves that require the biggest changes, it۪s the attitude of the landlord community. We need to move away from the feudal relationship between landlords and tenants. We۪re no longer distant rent collectors. We need to recognise tenants as customers and we need to make sure they۪re satisfied so we retain them in the long-term.۝ The headache for landlords is in determining just what their occupiers want and how to satisfy all of them if they want different things. And while some occupiers will inevitably want to manage the design and delivery of their own office fit out, others simply don۪t want the hassle. When I speak to occupiers they don۪t think about an office, they want a productive workforce,۝ says Richard. Around 10% of a businesses costs are rent and property, c.90% are staff costs, so making sure you have what you۪re people want is a far more important job. Landlords have got to make sure that customers are given spaces that enable them to give what their people need, whether we۪re providing it or if they۪re doing it themselves.۝ Flexibility isn۪t just being seen in office design. Rents that different tenants pay can vary markedly in the same building depending on the fit out and the solution that the landlord is providing. And with landlords seeing moves to shorter lease lengths, it۪s clear that lease length and covenant will no longer be the driver of value moving forward. What we require is buildings where landlords and tenants are working in partnership. It۪s about creating an ecosystem where occupiers want to be and where they can see value in being around other businesses. That۪s what۪s going to drive income stream and be recognised by investors.۝

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