Despite larger agency firms trying to talk up the market, the reality is very different.
Research would suggest that, on average, London office occupiers are looking to lose 30% of their current space. In truth, it will take time to settle but there is no doubt the pandemic has accelerated the move towards flexible working. We won’t be sitting in our central London offices from 9 ‘til 5, Monday to Friday, going forward. As soon as society acknowledges flexible working, it immediately highlights that less office space may be required.
Currently, Trident is seeing companies looking to lose more than 30% of their current space. We are dealing with lawyers losing 75%, accountants losing 66%, and one marketing company losing 50%. In fact, we have a client who is seeking to lose 100%, but, who indicates they may re-enter the market at some point.
The upshot is that large swathes of central London offices could become superfluous. Serious concerns have already been expressed about certain parts of the Docklands Area.
So, what should we do given the downsizing trend?
As always, speak to your tenants. If a lease end or a break is approaching, it is probably better to have some tenants rather than none. That way, you will reduce rates and rental voids. What you do with that returned space will depend on the building and the market. Remember that others are downsizing too, and you may have just what they want. We have noticed a trend in “plug and play” spaces. There may be merits, therefore, in retaining kitchens, meeting rooms and IT infrastructure.
I would caution against banking on large dilapidations pay outs, bearing in mind the burden to prove loss either by undertaking works or preparing a Section 18(1) valuation.
Many older buildings may require total repurposing. Here you may need a whole team approach under project managers and building surveyors to coordinate the planning changes and other alterations and adaptations so that the building can generate income in another way in the future.
It is going to be a tenant’s market for a long time. There will be reduced rents and plenty of choice in space, with incentives on offer. However, the key is to understand what your company will look like in the new normal and what the expectations are regarding your space. Again, we have already seen a move towards hot desking and breakout spaces, larger meeting rooms and spaces, and better and more welfare facilities. However, some tenants are waiting to see what happens in the future and are not inclined to spend any money until the time requires.
Our increasing use of the internet and paperless offices means that the day of the storeroom is nearly gone.
Flexibility will be key. Many will look to reduce the space they occupy but would also like the ability to take up more space locally and relatively swiftly if the need arises.
There is going to be much more choice and many, I would envisage, would prefer to relocate to the city to be cheek by jowl with major firms rather than perhaps retain their current offices on the periphery.
It is going to be a tough time for agents but arguably there will be plenty of leasing work about, it will just be of a different scale and type. An understanding of the issues around second-hand space will be needed. We will all have it tough until the effects of the vaccine kick in. Once it does there is no reason to suspect that recovery will not be swift.
From a building surveying point of view, we will all suffer from the lack of graduate intake. However, we should look forward to a relative bonanza in our work as we deal with all the reconfiguration and repurposing of buildings which will be needed.
Expertise in fire regulations and environmental standards will continue to be important looking forward.
To discuss new projects with Roger, please email him at email@example.com, or call him on 07775 944662.