The COVID-19 pandemic has significantly affected the way businesses operate. One key change is the shift towards hybrid working, which has greatly impacted office space rentals, especially in London and the UK.
This article will explore how hybrid working affects renting office space and provide a few examples of large businesses that are following the trends.
Reduces the Demand for Large Office Space
One of the most notable effects of hybrid working is the reduced demand for large office space.
As many employees work remotely for part of the week, businesses are no longer looking for dedicated desks for each member of staff. Organisations have implemented desk-sharing policies and, therefore, reduced the workspace they need.
This has resulted in landlords seeing a decline in demand for large spaces. The decline has led to greater competition between landlords looking to attract tenants, with many offering discounts and incentives.
HSBC is a great example of a vast organisation cutting down on office space. They have announced plans to reduce their workspace by 40% globally, including major reductions in their Canary Wharf HQ in London.
This trend highlights the move towards a more flexible and cost-effective approach to office space in the hybrid working era.
Increases Requirements for Flexible Leases
The pandemic created uncertainty, which has made businesses favour flexible leases. Companies are now looking for contracts which will allow them to adjust their office space according to fluctuations in their staffing levels and business needs.
Shorter leases are becoming more popular as businesses become more conscious of committing to long-term leases. Instead of leases of 5-10 years, companies prefer month-to-month or up to 3-year contracts.
Some leases can be customised to include options for scaling within the same building. For example, a tenant may have the option to expand into extra floors of the building or downsize if their needs change. This ensures they are not paying for unused space.
Flexibility is crucial as businesses navigate the hybrid working model.
Promotes Reconfiguration of Layouts
Hybrid working has made companies rethink their office space layouts. Traditional office designs with rows of desks and cubicles are being replaced. Businesses now prioritise teamwork and creativity, increasing the demand for open-plan layouts.
When employees are in the office, whether on schedule or spontaneously, businesses ensure that they come into an environment where they can socialise and collaborate.
For organisations with a desk-sharing/hot-desking policy, extra space can be used as breakout areas or meeting rooms to encourage teamwork further.
Companies Shift to the Suburbs and Satellite Offices
As remote working increases, businesses are reconsidering the need for city-centre office space. Many organisations choose to establish satellite offices in the suburbs, while some companies are relocating their headquarters to less central locations.
The shift to the suburbs reduces the cost of office space and shortens commute times and expenses for employees.
In London, for example, we have seen increased demand for office space in areas such as Hammersmith and Croydon.
Coworking Spaces are More Sought-After
We have discovered a surge in demand for coworking spaces as a response to hybrid working.
A coworking membership includes access to a shared workspace and onsite amenities such as meeting rooms and event spaces.
Companies can reserve the exact number of desks they need each day, thus saving money on unused office space. This flexibility is unparalleled for businesses that don’t require a full-time private office.
More Focus on Amenities
Organisations are looking for workspaces with more than just desks and chairs to attract employees back to the office.
The demand for high-spec buildings with facilities such as gyms, roof terraces, and in-house cafés is rising. Serviced offices provide an excellent solution. Run by a management team, they offer private workspaces with access to shared amenities in the building. These features offer companies a competitive edge when recruiting and retaining employees.
Furthermore, tech-driven amenities are also becoming a higher priority. Fast internet and video conferencing equipment are key to managing a hybrid team. These technologies enable employees to stay connected to colleagues and work more efficiently, bridging the gap between working from home and the office.
By renting office space that focuses on amenities, companies can attract staff to work from the office while still offering a good work-life balance.
Stronger Emphasis on Health and Safety
Health and safety are still at the forefront of most businesses in the wake of the pandemic.
Employers and staff alike are keen to ensure a hygienic workspace. For businesses, this includes investing in the latest ventilation systems, implementing cleaning protocols and touchless technology wherever necessary to minimise physical contact.
Some companies have maintained social distancing as a key policy post-COVID. Some are re-evaluating the density of their office spaces to maintain social distancing and reduce the risk of common viruses spreading.
Increases Focus on the Environment
The importance of sustainability has been reinforced since the increase in hybrid working. By reducing daily commutes, companies have taken the first step to reducing their carbon footprint. This has led to businesses opting for energy-efficient buildings and implementing sustainability policies.
Microsoft is a great example of this, as it has committed to being carbon-negative by 2030. The company’s focus is on optimising its workspaces to be more energy-efficient while encouraging hybrid working to reduce the need for large energy-intensive buildings.
From our experience, we have found that green certifications and environmentally friendly features are now some of the top requirements when clients search for offices.
Property developers are aware of this trend, as seen by the new Bloomberg Headquarters in London, which was designed to be one of the most sustainable office developments in the world.
There’s no denying that the hybrid working model has reshaped office space rentals in London and the UK. Reduced demand for large workspaces, the need for flexible leases, and the uptake of suburban offices are all trends that organisations must now navigate.
As the model evolves, so will the dynamics of the office space market, providing further challenges for businesses and landlords alike.
