Company chiefs plan to cut office space after pandemic

October 06, 2020

Company chiefs plan to cut office space after pandemic accumulate capital

Company chiefs plan to cut office space after pandemic

According to a new survey by the Institute of Directors (IoD), almost three-quarters of directors said they would encourage more staff to work from home after the pandemic.

More than half of British executives intend to cut back office space as staff move more permanently to working from home in a sign of the long-term impact of the pandemic on the British property market.

Companies have been forced to send many employees home to work over the past six months following lockdown restrictions, most recently in September after the government reversed its back-to-the-office plans.

This has led to many people embracing homeworking as a default option, with managers reporting little sign of a feared loss of productivity.

Shift to homeworking reducing need for office space

Company chiefs are now rethinking the need for expensive city centre offices. In the survey, published by the IoD in September, more than half said their organisations intended to cut long-term use of workplaces. More than one in five in the survey of almost 1,000 company directors reported their use would be “significantly lower”.

Alarmingly for property owners, among those who were using their workplace less, more than four in 10 said that one of the main reasons was that working from home was proving more effective than their previous set-up.

Property executives are concerned about lasting shifts on portfolios. Rents are usually slow to respond given normally long-term leases, but managers have reported that they would reconsider downsizing at the next lease break or when their terms end.

London running on minimal office capacity

Many buildings in the City of London in particular were only just beginning to see more workers return in September, when the government changed its guidance again to only let workers return who needed to do so.

“Remote working has been one of the most tangible impacts of coronavirus on the economy. For many, it could be here to stay,” said Roger Barker, the IoD’s director of policy.

He added that working from home “doesn’t work for everyone”, however, and said the office still had benefits such as development and networking.

“Looking ahead, it seems more and more companies will take a blended approach to where they work. Any transition can cause challenges, and the government should look to ease this.”

A third of survey respondents said they were keeping people working from home because of the possibility of a further surge in coronavirus infections and more restrictions, while a similar number cited concerns over public transport.

But the IoD warned that the prospect of increased homeworking over the long term could raise legal questions around employers’ responsibilities for staff outside the office. The institute urged the government to take steps to help SMEs and the economy adapt to increased homeworking, such as tax incentives for small companies to use new digital technologies.

IoD survey echoes Accumulate’s findings

Over the summer, Accumulate carried out its own survey of more than 500 senior decision-makers across various UK industries, with similar results to those of the IoD.

73% of our respondents told Accumulate they believe businesses will relocate to smaller commercial spaces because of the pandemic.

Over a third (37%) said their own business is planning to downsize within the next 12 months, with all of these looking for a new location and cheaper rent now there is “less emphasis on employees working from the same office.”

Three in five (58%) believe working from home will become “the new norm.” Although government working from home advice has ended, many companies have allowed employees to continue working from home on a permanent basis while the coronavirus crisis is still ongoing.

Paul Howells, CEO of Accumulate Capital, commented: “Our research demonstrates just how COVID-19 is affecting both the UK’s businesses and its commercial real estate market. As a result of the pandemic, businesses clearly no longer look at offices and commercial property in the same way, which will have significant implications for property developers and commercial landlords.”

“The increase in remote working will likely see businesses look to smaller, more flexible workspaces. The days when a company would own or rent an office with a desk in it for each and every member of staff are coming to an end — in reality, this trend was already taking shape, but the coronavirus crisis has greatly accelerated it.”

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