Over the last few weeks two data-points caught my eye. The first from the British Council of Offices’ latest occupancy survey shows that our offices are becoming more densely occupied. The average UK office now provides 9.6sqm (103sqft) of floorspace per employee compared to 9.9sqm (107sqft) in 2013. The second from Transport for London showed that London Underground passenger numbers have fallen by 2% in the year to January 2018, the first fall in 20 years.
These two data-points may seem unrelated but they are both underpinned by the same root cause. The rapid expansion of technology has fundamentally changed the way we work with implications for office density and travel to work. It has allowed employees to base themselves anywhere – at home, a coffee shop, a train or airport – and enjoy the same seamless access to systems and even co-workers as they would if they were physically based in the office. Productivity is no longer tied to office presentism. Technology has blurred the boundaries between work and home too. The omnipresence of mobile phones and laptops mean that work does not stop when we leave the office, work is no longer 9 to 5.
This has changed the role of the office. Rather than being primarily a workplace it has become part-workplace, part-meeting place for disparate staff, part client-entertainment space and part social space too. Staff flexibility means the office is used for longer periods – some staff prefer to start late and finish late, others are early birds. Occupancy rates therefore fluctuate more than ever before. Some staff may like to work in silence when they crunch numbers but enjoy the company of their co-workers when they write reports. This means that a one-size-fits-all office model no longer cuts it.
Forward-looking offices must instead provide a range of environments – quiet rooms, communal break-out zones, cafes, hot-desks and meeting rooms – which allows multi-functionality and empowers employees to choose how and where they work. A range of amenities which promote work/ life balance are increasingly being provided too, given the blurred boundaries between the two. These can include anything from showers, childcare and relaxation rooms through to cafes and beer fridges. These changes are driving down office density.
Declining passenger numbers on the tube are not just due to flexible working enabling people to work from home more often but they are attributable largely to technology. More people than ever before shop online so there is lesser need to physically visit stores. Riding sharing apps like Uber and Lyft offer an affordable and often more convenient way to travel. Technology has fundamentally altered the way that we live our lives and the London Underground is feeling the effects.
At Mayfair Capital we invest based on future occupational demand. What, then, do we make of the latest data-points?
We believe that greater workplace flexibility and the evolving role of the workplace will re-enforce the need for centralised, accessible offices. Occupiers will take less aggregate space as employee density increases but the necessity of providing engaging, user-focused space to support worker productivity and empowerment will emphasise quality. Employee and corporate flexibility will drive demand in regional markets which offer a strong liveability and cost proposition. Desire will grow for agile space which can be flexed up or down to cope with worker rates that fluctuate daily. This will increase their preference for flexible, on-demand space over long-let space.
For landlords and property owners it means that including an element of flex space within our assets, ground-floor co-working for example, may assist in attracting and retaining occupiers. It will increase the importance of attentive asset management and the creation of communities to help real estate adapt to the changing needs of its occupiers.
Senior Analyst - Investment Strategy and Risk