A close observer of Birmingham’s property scene 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, a director and co-founder of the city’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 lock-down fully ends,” he says.
“Inevitably, very few people are 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.”
Bryce thinks that as business models evolve during lock-down, 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.
Although the KWB team has become avid users of Zoom and other video-conferencing apps during lock-down, Bryce 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 lock-down, 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.
“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.”
After the crisis, Bryce 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 quality 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.”