No-one could have predicted that the way we work would change so dramatically in such a short period of time. This sudden change has led to dialogue around “the future of the office” with real estate and design experts eager to see what the long term office landscape will look like.
But more deserving of our attention right now, is the current state of the office landscape. How will businesses approach a re-entry into the office after the latest lockdown? What are the short term implications of these lockdowns on our office space? Two things are certain:
1.The office itself will never completely disappear and there will always be a need for it in some form or another
2.When we eventually return, it won’t be to the office as it was pre-COVID
Here are some of the considerations around office space right now:
Stay Vs Go
If your lease is due to expire soon, how will you decide whether to stay in your existing space? The answer is largely dependent on the current state of your business. Some businesses have needed to completely re-structure due to COVID and it is hard to say what they will look like even a few months from now. At this stage it may be difficult to take on a new space if your business faces uncertainty. On the other hand, it may be necessary. Each business needs to assess the value of their current space after spending a large amount of time away from it. It’s also helpful to talk to other businesses in a similar position and to monitor market activity around you.
While there is still no vaccine available, businesses need to do everything in their power to ensure the safety and wellbeing of their staff. Existing infrastructure cannot be easily adapted in the short term, but certain measures can still be applied within the space, such as decreased office density, fitout changes to limit virus transmission and abolishment of shared spaces and open plan.
The current working from home is more than a trend. It is rapidly becoming the norm. But how does your staff perceive this arrangement? There are some whose working style thrives in a home environment, while others depend on more collaboration and face to face contact in order to be productive. Listen to your people in order to gauge what’s working and what’s not for them. Also consider how often you should be coming together in order to keep your team engaged. Should you be meeting more often once restrictions are lifted, or will other modes of communication like zoom become permanent?
Change In Market Conditions
When it comes to options for office space, businesses need to make informed decisions. 2020 is now trending towards a tenant’s market. With decreasing demand and the pipeline of supply entering the market for some years, conditions are friendlier, as landlords adapt and become more flexible with their tenants so they will remain beyond their lease expiry. This new collaborative relationship is further backed up by government legislation, which encourages greater understanding from both sides. There is also an increase in subleasing and ability for disposal of excess space during this period.
If your expiry is within a 12 month window there are an increasing number of landlords that understand the market and are now willing to negotiate a better deal than early 2020. In order to keep buildings occupied, landlords are offering delayed lease commencements and working with tenants on fitouts that will enable them to move in immediately while still offering a future proof design. Good quality speculative fitouts is an increasing trend. The space itself now holds a new importance for both tenants and landlords so design and amenities will be key talking points in negotiations.
Some tenants have started searching for a new space long before their lease expires in the hope that they will find a ‘COVID Deal’ - a great deal on a new lease due to fewer tenants in the current market. While landlords are certainly offering some great incentives, no business should expect to move from a B grade to a premium building or a bargain price, particularly if their lease has an expiry in 2-3 years. A Grade and Premium buildings in good locations are expected to hold their value and occupancy, while B Grade assets will be the first class to experience a softening. This is strongly linked to supply and demand in each local area.
As uncertainty grows and the reality of the pandemic further sinks in, businesses can leverage their situation and their use of space today so they can best equip themselves for the office of tomorrow.
Contact BRM's expert property team to discuss your current situation and we'll be happy to help.
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