‘This is evolution’: fear, footfall and rethinking the office

Office owners and occupiers cannot be “afraid of reinvention”, say the bosses at trade body the British Council for Offices – and should look to the evolution of retail real estate for lessons as they revamp their buildings. [caption id="attachment_1186702" align="alignright" width="200"] Despina Katsikakis[/caption] Speaking at the BCO’s annual conference in Dublin last week, incoming president Despina Katsikakis and chief executive Richard Kauntze warned that the UK is at “a critical point of transformation” for the workplace and working practices in the wake of the coronavirus pandemic. “It absolutely needs to be reimagined. The office needs to be an inspiring destination for people to connect, to learn, to socialise, to bond, to be part of the culture. Very successful offices have always done that,” said Katsikakis, who is also global lead for the Total Workplace division at Cushman & Wakefield. The adage of reduce, reuse, recycle was sounded by Kauntze, who added: “I don’t think we should be afraid of reinvention. It’s nothing new, that’s human history. Look at building types and use, it was ever thus – buildings are endlessly being reinvented and reused.” Katsikakis and Kauntze sat down with EG to discuss the resilience of the office in the face of asset obsolescence, lessons that the asset class can learn from retail and the return to work. Recommendations from retail The BCO duo said the office market can learn pertinent lessons from other asset classes and should be looking to retail as a case study for how to navigate its reimagination. [caption id="attachment_1186705" align="alignright" width="200"] Richard Kauntze[/caption] “Retail has moved from footfall to inspiring, experiential retail that connects you to the brand, that connects you to the culture,” said Katsikakis. “You don’t go to the Apple Store to buy your Apple computer. You go for the experience and to hang out with your friends and to try some new stuff, to listen to a lecture and be connected. It’s the same idea [in the modern office].” To avoid assets becoming obsolete, Katsikakis and Kauntze encouraged office owners not to undervalue the role of place in promoting productivity and ultimately profitability, again by comparing the situation to that of retail. “You go to the Nike store and you feel the vibe,” said Katsikakis. “You get connected to it. You might then go online and buy something, right? You do the process anywhere, but you do the experience piece in a physical place.” Some occupiers have failed to recognise the importance of real estate in reflecting and fostering company values. Businesses should be viewing the office as a tool to enhance and reinforce their work culture and wider ESG strategy. “Whether you choose to acknowledge it or not, the office becomes a physical manifestation of your culture and values,” said Katsikakis. “Organisations that have understood this for years have used physical place to drive culture and behaviour. But for the most part, 85% of offices have ignored it and have looked just at financial metrics.” Office versus obsolescence The shift to higher-quality space with more experiences, more curation and more services from the landlord has created a supply and demand imbalance, with occupiers crying out for premium workspaces. This has resulted in “very high rents” for better buildings. “There is a need to repurpose existing building stock. I don’t think we can get away from that,” said Katsikakis. “But what we do about it, that is the opportunity. Being able to reimagine and repurpose existing building stock and have more flexible planning and zoning that allows for a mix of uses will be critical.” While the flight to quality and demand for good-quality product in the right location is clear, a post-pandemic recovery for old office stock and the uncertainty surrounding new working mandates remain problematic. “We are still at the early stages of coming out of the pandemic, and it’s amazing how quickly we all forget,” said Kauntze. “This story hasn’t ended yet – there is a long way to go. I think many businesses haven’t quite decided how that might be fixed. And it’s going to vary from business to business, and their physical requirements will flow from that.” Fostering resilience Katsikakis and Kauntze recommended that developers and landlords think about how to create resilient places, both environmentally and financially, that will help draw workers back to the office. For offices to “earn the commute”, they said, it is vital that not only the office but its surroundings are “destinations”. A broad F&B, leisure and retail offering will offer office-goers something they cannot get from the comfort of their couch. They added that day trade from city workers is all the more important in helping bolster the UK economy, and so creating spaces that are both inspiring and economically resilient is crucial. Even if office owners tick every box, an end to homeworking in its entirety is not on the cards, Kauntze said. “Hybrid working is not going to go away, and there is nothing wrong with that,” he said. “But that in no way diminishes the value of the office, a better space used more intelligently. It is still the anchor, because I don’t think you can have a business if everyone is in silos and they are not coming together.” Data-led decisions One way to effect change and attempt to avoid obsolescence is by analysing data to make informed choices about how to use space, said Kauntze, adding: “The biggest consequence output from the pandemic is using the technology that existed before the pandemic to our advantage and using the physical workspace more intelligently.” Get that right and developers will be able to create a building with a 100-year-plus lifespan. The BCO pair discussed how buildings need to be future-proofed and kept for longer, contrasting Westminster Abbey with City of London offices that can be torn down in mere decades. “What are we thinking? How does that make sense? It doesn’t. What planning system allows that to happen?” said Katsikakis. “What seems to be lacking, not just in our industry but globally, is robust enough governance to help guide how to deliver ESG.” She added: “We can change the services, the scenery, the settings, the furniture, but the building shell needs to have a resilient lifespan that [we] can adapt and reuse.” The pandemic has acted as a catalyst for change in the industry and has spurred a period of rapid adaptation in the office sector, as both landlords and occupiers have had to grapple with the return to the workplace. But this change is not to be feared, according to the pair. “I don’t think people should be surprised or afraid of this,” said Kauntze. “This is evolution. The pandemic has accelerated what was going to happen anyway, and it’s a more enlightened, intelligent approach to how we lead our lives.” To send feedback, e-mail chante.bohitige@eg.co.uk or tweet @bohitige or @EGPropertyNews Discover which agents have been most active in the UK’s regional office markets so far this year >> Photos: Main image © Marc-Olivier Jodoin/Unsplash Portraits © BCO