2022 FORECAST
Making it work
The Covid-19 pandemic has changed the way we work. Throughout 2021, the workforce fully embraced hybrid working after being ‘pushed in at the deep end’ during the many lockdowns and various government restrictions that the UK has lived through. The relatively muted levels of ‘return to the office’, when workers have been willing and able to, is evidence that hybrid working is here to stay.
The ‘why’
Despite the recent evolution of working practices, the office remains an integral part of business around the world. There is now a greater focus not on the quantum of office space, but rather how to optimise it for employees who can choose where to work based on the tasks and activities they need to carry out1. A 2021 survey by KPMG highlighted that fewer companies are now looking to downsize their office space and there is increasing evidence that employees will choose between the office, the home or elsewhere based on the individual tasks of their day.
Surveys by Leesman2 have found that office workers feel that the home is best for planned meetings, routine tasks, and audio conferences while the office is best for learning from others, social interaction, using specialist equipment and hosting clients. This will of course vary based on employees’ individual preferences, working styles and home and office set ups. Leesman also found that the quality of employees' home office directly correlated with how often they would like to come in the office – with those reporting the most negative home working experience wanting to spend more days in the office.
HOME V OFFICE: WHERE ARE TASKS BEST SUPPORTED
of workers reported burnout during July 20205 and another survey by FlexJobs with Mental Health America found that employees were three times more likely to report poor mental health since the pandemic6.
WHAT IS THE PURPOSE OF THE OFFICE?
HOW SHOULD COMPANIES HANDLE THEIR OFFICE MOVING FORWARD?
This will have its own challenges – not just in the UK. PwC reported that 36% of executives believed the loss of corporate culture was the biggest problem with hybrid work3. It’s also likely that the disconnect created from working behind a screen, and the fact that we have been working more4 - 69% of workers reported burnout during July 20205 and another survey by FlexJobs with Mental Health America found that employees were three times more likely to report poor mental health since the pandemic6 - has contributed to ‘the great resignation’. A recent survey of 6,000 workers found that 69% were feeling confident about moving to a new role in the next few months, with 24% planning a change within three to six months – significantly up from around 11% per year7.
Flight to quality
Whilst the return to the office continues to be impacted by the virus, we have seen an increase in the number of workers returning. According to Remit, occupancy levels are up to 21% as of early November 2021. Our UK Cities Recovery Index, which covers more than just occupancy improved to 63 nationally (compared to a pre-pandemic level of 100) during the latter course of 2021. While this will increase throughout 2022 (depending on new Covid variants), the extent to which workers return for a portion of the week will be impacted by the quality of workspace.
The Leesman Index (Lmi) found that staff in the best offices are more positive about their workplaces, with the focus being on productivity, learning, pride, and client care. Leesman have even found that high performing workplaces act as a pull factor that attract staff into the office. By comparing the Lmi scores of three different locations from a single organisation, Leesman discovered that employees who worked at the location with the highest Lmi (nearly 80, which is close to the top among Leesman’s clients), over 90% wanted to spend most of their working days at the office.
POST COVID-19 DESIRED DAYS PER WEEK IN OFFICE
This is one of the fundamentals driving the so-called ‘flight to quality’. Most the UK’s major markets continue to have a Grade A supply shortage, and even with a tail off in demand, competition for prime space has widened the rental differential between Grade A and B office space.
Since 2019, average Grade A in London rents have shown a 7.6% increase whilst Grade B rents have moved in the opposite direction – decreasing by 11.6%. This trend has also been seen in the regional markets, with Grade A rents increasing 9.7% and Grade B decreasing by 3.1% in this timeframe.
Occupier focus on decarbonisation and sustainability is exacerbating this phenomenon. In central London, 70% of the top rents achieved this year were on offices that have, or are aiming for, a BREEAM score of Excellent or Outstanding; with the regions’ seeing 60% rated as BREEAM Very Good or above.
AVERAGE RENT DIFFERENTIAL FROM GRADE B TO GRADE A OFFICES IN LONDON
In the right space
Occupiers want high-quality space, which can be used in the most efficient way for individual business needs. This is driving a change in the way space is used, rather driving down spatial needs, with occupiers increasingly calculating how many desks they will need on a busy day and using leftover space for collaboration, private spaces, and relaxed work areas. Additionally, there is growing demand for offices that have overspill capabilities either with serviced space within the building or locally for the rare day that sees the whole company within the office, or all the meeting rooms being in use.
Providing the variegated types of working environments that can best facilitate these tasks is the fundamental challenge for office landlords brought about by different ways of working. We expect that 2022 will bring the landlord-tenant relationship even closer within this context to best optimise the ways in which companies can not only get the best out of their workers, but also act as an ‘attractor’ on a regular basis.
The return to the office – when it comes – will allow employees to socialise, collaborate and build relationships which has been found to boost both productivity10 and employee satisfaction11.
REFERENCES
1https://news.microsoft.com/2021/03/22/microsoft-releases-findings-and-considerations-from-one-year-of-remote-work-in-work-trend-index/ 2https://www.leesmanindex.com/media/Leesman-Impact-Code-Home-30.06.21.pdf
3https://www.pwc.com/us/en/library/pulse-survey/future-of-work.html 4https://www.forbes.com/sites/zakdoffman/2020/03/24/coronavirus-work-from-home-longer-hours-more-distractions-and-this-surprising-privacy-threat/?sh=47114e707363 5https://learnmore.monster.com/poll-results-from-work-in-the-time-of-coronavirus 6https://www.flexjobs.com/employer-blog/companies-prevent-employee-burnout-during-pandemic/ 7https://www.theguardian.com/money/2021/nov/01/the-great-resignation-almost-one-in-four-workers-planning-job-change 8https://www.leesmanindex.com/media/Leesman-Impact-Code-Office-30.06.21.pdf 9https://www.leesmanindex.com/media/Leesman-Impact-Code-Home-30.06.21.pdf
10https://www.bcg.com/publications/2020/valuable-productivity-gains-covid-19 11https://chronus.com/blog/why-having-friends-at-work-can-help-you-and-your-team