Monday 28 September 2020 8:00 am

There’s no place like work: Office spaces still have a future

Savvas Savouri is chief economist at Toscafund Asset Management.

There is talk that working from home has become so ingrained and that the old working arrangements are so untenable in this new socially distanced and digitally enhanced world, that it will force city centre offices to be entirely repurposed — and perhaps turned into vertical rabbit hutch towers of studio flats.

This debate is gaining more traction with the onset of the “second wave” and the government’s renewed pronouncements that we should work from home if we can.

 When I overhear this claim that office blocks potentially having to convert to residential or be left unlet and economically idle, I imagine this absurd exchange: “Where are you now working?”, “From home, Flat 1, 1 City Road”. “Interesting, where did you work before?”, “An office at 1 City Road”.

No doubt some will argue the new “work from home” culture will free us to move to rural idylls, resulting in deserted urban centres, not merely distressing the office market, but adding further pain to urban retail and leisure space. I feel this is nonsense.

The long-standing tradition of retirees flocking to the countryside has been counterbalanced in recent years by the increasing desire of the growing metropolitan class to be “amongst it all”. As higher education becomes more de rigueur, rising student numbers have also played a role in filling city and large town centres. However, young working professionals have been the main movers because ironically, they demand not to be socially distant from it all but socially present. 

This has been the story from London to Liverpool, Leicester to Leeds, Bristol to Birmingham and Southampton to Sunderland, all seeing household numbers in and around their centres more than doubling since 2000. No doubt working habits will evolve, although far from being confined to our homes we will continue to work largely from offices situated in and around city and town centres. 

As we return to the office, and we indeed will, those commercial premises which serve our needs going to and from work and during our lunch breaks, will be revived. While the centre of Britain’s towns and cities — and in particular that of its capital — currently look moribund, commercial recovery is certain. Certain yes, but only after a necessary contraction — or should I say “extraction”. 

What is often the case anatomically is also relevant economically. Our appendix and wisdom teeth were once essential for the crude diets of our predecessors. Now, thanks to our more refined tastes and expansive food choices, we can manage perfectly well without them, and in fact often feel much better for their extraction (not that our modern diets are entirely healthy of course). Indeed, there are other parts of our body now serving no useful modern purpose, but which have never evolved out of us. 

With this in mind, within the body of an economy there are parts which, having been essential, cease being so, and indeed whose continued presence causes – avoidable – displeasure. And just as extracting wisdom teeth or an appendix is never without procedure and some discomfort, the same can be said for extracting a sector from an economy, one which once performed a valued role, but is no longer required. 

Such extractions will of course leave scars, but these will not prove long lasting. The reality is that those mid-market restaurants, retailers and other elements once essential within the body of the UK economy can and will be extracted. 

Fear not, the scars left on high streets and shopping centres from this procedure will not last long, far less in fact compared to when we evolved out of coal mining and textile milling. 

Returning to the issue of prime offices in the heart of London, they will undergo a change in configuration, a change which will be welcomed. Buildings in the City, Docklands and other central business districts which now adorn the London skyline will cease being the white-collar professional equivalent of battery farms. Office spaces will and are becoming more flexible to reflect modern working practices, which means in most cases they are significantly more comfortable as well as more productive.

Far from a fall in office take-up, one should also expect an increase, as firms react to events by creating a nexus of satellite offices, giving their staff the option of not necessarily having to commute every day, but still getting away from home and interacting with colleagues in a working  environment. Rather than the end of the urban office market, we are about to welcome a new beginning.

Main image credit: Getty

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