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Office sector must take lessons from retail and hospitality

Alice Breheny, Global Head of Research, Nuveen Real Estate

The office sector will change and learn from retail and hospitality, experts agreed at Real Asset Media’s Global Outlook 2021 – Key Trends for Real Estate briefing, which was held online recently.

“In future, working in an office will be more of an experience, like retail and hospitality,” said Alice Breheny, global head of research, Nuveen Real Estate. “It will be challenging to strike a balance between what landlords want and what occupiers want.”

The jury is still out on the home working trend and whether it will have a long-term impact on the sector, but it is reasonable to expect more flexibility and more of an emphasis on collaboration. The pandemic precipitated change and a re-assessment of priorities, just as the rise of e-commerce forced bricks-and-mortar retail to innovate and be more creative.

“Covid-19 has been the online-retail moment for the office sector,” said Nick Axford, principal, global director of research, Avison Young. “In future, owners and occupiers will be working together to create a good environment and a curated experience.”

Turning the office into a healthy, safe, pleasant place where people want to be will be key in attracting workers back and in retaining them.

“The war for talent has gone cold now, but when we need to pull people back into the workplace, competition will heat up again,” said Simon Martin, head of investment strategy, Tristan Capital Partners.

Past experience no longer a guide to future behaviour

“We will return to the office and curating spaces will be very important,” said Kim Politzer, director, head of research European real estate, Fidelity International. “But you cannot take the behavioural science approach, it is impossible to rely on past experience in this extraordinary time and predict how people will behave when it’s over.”

We need to step back and wait in order to assess what was short-term noise and what are the long-term effects of the changes we have seen since the outbreak of the pandemic last year.

“People are delaying decisions now, so it is difficult to make predictions,” said Breheny. “It’ll take a whole lease renewal cycle to make our assessment.”

Offices should not all be put in one basket because there are profound differences in how they are used and needed depending on the type of tenant.

“Life sciences and tech are very keen to bring people together to collaborate, while call centres are happy for people to work from home,” said Martin. “There are different patterns of office occupancy for high-knowledge sectors.”