As we emerge from lockdown and home working, companies across the UK have adjusted their working patterns, a priority shift that has altered the traditional business requirement for office space.
Office leases have conventionally been some of the longest, making them a secure investment for developers. However, in the current economic climate, extended lease terms are no longer an appealing prospect for many businesses.
Many have found a hybrid system of home- and office-based working to be a benefit, not a hindrance. As restrictions ease and the return to the office is under way, we are likely to see a variety of working practices, with some maintaining an element of home working that offers flexibility.
There are extensive benefits to a central office where staff work collaboratively. But for many, it is no longer a five-day-a-week requirement. Many businesses realise the cost-saving benefits of reduced office space and flexi-working has changed their requirements, with a rise in demand for multiple, smaller office locations.
A practical solution to this conundrum is flexible leases. Rather than signing up to a fixed location for an extended time, businesses exploring a hybrid working system can consider more flexible working spaces. The competitive market for prime office space left some businesses overstretched and they strugged to cover the cost. A flexible lease could ensure that businesses only pay for the space they need on terms that work for them.
Operating on shorter contracts could benefit tenants and landlords by helping reduce arrears and unpaid rent as businesses can realistically forecast costs, giving landlords and property owners a secure income. It also helps cement a strong tenant-landlord relationship, which can lead to fruitful partnerships and potential longer-term agreements once businesses better understand how they will operate moving forwards.
While London has always been the UK’s business hub and many large firms will certainly return, many more will no longer consider a single large London location necessary. A substantial percentage of employees live outside London, making a smaller office hub outside the city desirable. This is evidenced in a recent study by CBRE that revealed that take-up of office space in the South East was 58% higher in 2021 than in 2020.
As businesses seek new locations outside London, the Thames Valley has become an obvious place to create hub offices. Many businesses have sought to establish themselves just outside the capital, for example along the M4 corridor, where many big brands have branched out, serving commuters living outside the city. Alternative locations present the opportunity for more interesting, characterful buildings that appeal to staff and differentiate businesses, bringing company culture to life. From former town houses to mills and churches, there are many alternatives to bland, purpose-built offices.
Businesses have a cost-effective opportunity to elevate operations by changing up their office space, while landlords need to adopt flexible working in lease negotiations. Agreed terms that benefit both parties will help us all to get back to business.
Katherine Croom is managing director of Sorbon Estates