Is the move to a Work Near Home office model a headline to sell newspapers or a trend that real estate professionals should be cognisant of? More than 350 sign-ups to the latest Corenet event on March 4 would suggest that there is a swathe of interest in a Hub and Spoke portfolio strategy.
Hickey and the Instant Group presented their latest research “The Rise of Suburbia?” to assess the demand for regional workspace, the benefits of more office provision outside of city centres, and the limiting factors from a supply perspective. Data from both Instant and IWG clearly shows that regional demand for desks has increased during lockdown. But is this simply a lockdown trends or emblematic of a more substantive demand shift?
We were joined by Zurich, the financial services group, which has recently conducted a substantial survey of its workforce, and HR and workplace representatives from BT, a long-term proponent of regional office space in the UK. David Morley of Zurich flagged that his workforce has been quite clearly delineated by a 40:40:20 model of those that want to return to work, a hybrid home/office model and those that want full time remote working. To address this demand, he will be utilising additional capacity from the flexible workspace market to address a more diverse location spread. But his findings are similar to other firms from the financial services sector, with the workforce looking to sample a greater variety of choice outside of traditional city centre locations.
For BT, one of the UK’s largest employers in the regions, creating engaging workspace right across the UK has always been a priority. The focus now is to really narrow in on the locations that give them access to the greatest talent pool of technology-savvy recruits and those younger employees that might be described as “digital-natives”. To do this requires access to population and workforce data and marrying that up against office supply.
The above issues faced by Zurich and BT, and eloquently shared on the Corenet panel, reflect the dilemma faced by many employers of all sizes. To initiate a return to work, and one that offers reassurance to staff and optimal working environments, requires choice. The polls of more than 200 attendees on the day gave some indication of their direction of travel. The majority of respondents felt that the CBDs will recover but that they would rely on flex space to fill in the gaps of coverage and provide more options to staff.
Some of the benefits of a Hub and Spoke are obvious. Workers could save over £2,200 year and ‘get back’ 98 mins a day if companies adopted a Work Near Home model. Companies could save upwards of 23 per cent of portfolio costs by utilising a “Hub and Spoke” model that removes reliance on city centres.
However, if demand for office space in the suburbs and smaller towns across the UK continues at current levels, then supply will run out in 18 months. If just one per cent of city centre workspace demand moved towards the urban “fringe” markets then it would very quickly become saturated. Since the start of the Pandemic, demand for regional workspace has significantly outstripped that of Central London and the other large cities. Occupancy rates of suburban locations have also remained very high, for example suburban Manchester offices have seen occupancy rates of 85%+ even during the various lockdowns.
Our panelists at the Corenet event all recognise the potential benefits for the broader business of a more agile real estate approach. However, as our polls of the wider attendees attest, businesses are yet to make firm decisions over the future locations office portfolios. As the next few months sees a slow return to the office, this will be a period of time devoting to testing the right approach and learning what works for employees across a variety of options. For real estate professionals this will require looking at a number of options and developing a clear methodology to assess outcomes that work for the broader business. A challenging time, no doubt, but one that will possibly amount to a real shift in future CRE strategy.