Market Insight

Why your business needs a distinct property strategy for the City

The London office market has always been distinct from that elsewhere in the UK, but prior to the pandemic, the main differentiator for occupiers was based on convenience, prestige and work force. The downside to this was the price that had to be paid.
July 22, 2021
Following the pandemic and the rise in home working, occupiers have needed to think carefully about their property strategies here in London, to ensure that they are on the front foot post-pandemic.

When COVID-19 hit, many businesses operating in London suddenly found themselves with space surplus to requirement.

Some, with lease events that allowed for it, got rid of their centralised London presence altogether, in favour of more of a hub and spoke strategy in the regions with a greatly reduced London office which, for the most part, serves as a meeting hub. Meanwhile others continue to toil with how best to make the most of the excess space they’ve been left with.

What binds every business, however, is the continued challenge of just how to grapple with their future office needs in London. There is no doubt that a presence is required but what form should this take?

Why London is different

Whilst London’s office space challenges are no different to those of any other business across the UK, what sets the capital apart is the unique demographic of its workforce.

London’s population is comparatively young; the average age in London is 35.6, compared to 40.3 in the UK as a whole, with one in 10 people living in Inner London (11.4%) aged between 30 and 34. This compares to just 6.3% of those in the rest of England (Trust for London). Meanwhile, approximately 44.1 per cent of London’s adult population classify themselves as ‘single’ (Evening Standard).

What does this mean?

Well, having a younger workforce, even if it is just 5% different from elsewhere in the country, will dramatically affect your workplace strategy.

The pandemic has taught us that younger people miss the office as a place of work more than anyone else, for reasons that are already well documented – from the challenges of shared flats and a lack of space to work from home, to the social interaction craved and peer learning to be had in the workplace.

Occupiers therefore need to think about the nuances of their people demographics when considering how their property needs in the City may differ from elsewhere in the country.

With this in mind, the way in which the London office market evolves will, necessarily, be unique and we are likely to see more serviced office provision here as a result.

As with elsewhere in the UK, occupiers in London are foregoing the traditional lengthier lease in favour of shorter leases, with more flexible terms and shorter breaks – all of which are readily available from the serviced office.

There are a range of serviced offices available from bespoke space managed solutions through to the WeWorks of this world with desks and roaming passes for hot desks and lounge areas. The prices of these vary significantly, because the providers themselves do not yet know what the market wants or will do.

This state of flux and uncertainty is reflected in occupier demand. Nobody truly knows the extent of the space they are likely to need in two to three years’ time. Yes, people are likely to migrate slowly back to the office, but we do not know yet, to what extent.

What we do know is that, if you reduce the people based in your office by 50%, this does not translate into a comparable reduction in space.

Whilst offices will be smaller, they will likely be 75% of their previous size to allow for social distancing and to account for any future pandemics (for we are assured they will come) – building in flexibility and a work model that will work in those circumstances.

If staff come into the office just two days a week, then companies need to get 5 days’ worth of idea generating collaboration from these two days and office layouts need to encourage and facilitate this. An overarching strategy needs to be in place to achieve this and avoid empty offices on Mondays and Fridays with everyone attending mid-week.

Of course, if you only have half as many people in 75% of the space you once had, you aren’t likely to be happy to pay 75% of your previous rent roll, so this will need adjusting, requiring negotiation with your landlord.

It’s OK to be cautious

If you don’t have an immediate lease event, it pays to be cautious and wait to see how the market plays out.

Some occupiers are renewing leases for just a year and at reduced rents, whilst they wait for the situation to play out and the market to settle. Others are looking at occupiers who have surplus fully fitted space and seeking to take short terms arrangements on this space.

If you have two floors but only need one, explore with your landlord how you can reduce that.

But if you have a lease event in the next 12 months, take the opportunity to speak to your landlord about how you can work together to create a solution that works for both of you, after all, they will not want an empty building in the current market.

As things currently stand, there are opportunities for short term, flexible solutions on good terms in London.

Our occupier advisory experts can help you to achieve your workplace aims, so that your young(er) workforce can return to work in an environment which supports your needs as well as theirs – both practically, as well as mentally, socially and in productivity and people retention terms too.

If you would like to discuss your London office requirements or workplace strategy, don’t hesitate to get in touch with our London occupier advisory team.