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Offices will survive but expect a more discerning occupier

Investors who look beyond the short-term continue to believe in the office sector, delegates heard at Real Asset Media’s online briefing: Is the UK still OK? Covid-19, Brexit and the Property Markets.

“Demand is likely to be an issue for the next couple of years or so,” said Tony Brown, global head of real estate, M&G Real Estate. “But beyond that, my view on the office market is simple. I fundamentally believe that people will still want to work in offices for collaboration and brainstorming.”

The pandemic has forced people to work from home and had a negative impact on demand, with take-up in London sharply down this year. But in the long run this year’s experience might even have worked in favour of the sector.

“In some respects the office has become even more important,” said Stephanie McMahon, senior director, head of research, BNP Paribas Real Estate UK. “Do we need the same amount of space? Perhaps not, and that will play out over the next couple of years.”

Workers value the office experience after WFH

After months of remote working, people, especially the young, value the experience, the sense of community, the supervision, the training and mentoring opportunities that offices can offer more than ever.

“I have been surprised to see that the resilience of the office has been strengthened,” said Mark Haywood, partner, CMS. “Maybe we will shift to a three-days-in-the-office, two-days-at-home model and there will be tectonic changes in terms of space requirements, but it definitely will not be the death of the office as predicted by some.”

The focus will increasingly be on the right type of office, in terms of location, quality of building, sustainability and ESG criteria.

“We’ll see occupiers being more discerning about the kind of space they take because their staff will be more discerning,” said Brown. “They will look at clean air, wellness certificates, amenities, location, environmental performance. Those who can’t meet those demands will lose out and those who can will do well.”

The current risk-off environment presents an opportunity for the brave or far-sighted to make some good investments, experts agreed.

“It’s a good time to buy well-located London offices, even with a bit of manageable risk, because they are good value compared to other European capitals,” said Brown.

“I would go for offices too,” said Haywood. “Best in class in London or in the regions. People might opt for less space in future, but they’ll want better space.”