How to make the office a ‘cauldron of connection’

“What’s the power of workplace? What’s the value of the office? What impact does physical location truly have on the employee experience?”

These are big questions that the real estate industry is still struggling to answer conclusively – but which remain the subject of heated debate. They were summarised by Ana Stanojevic, an expert in workplace transformation, former agent with the likes of JLL and CBRE and, until recently, workplace strategy and development lead at Nokia.

Stanojevic was the opening keynote speaker at EG’s first Future of the Workplace conference. Over an afternoon at Kings Place in King’s Cross, N1, guests heard a series of panels and presentations delving into everything that a period of massive change means for the office market. With working practices and workplace demands evolving, what does that mean for offices – their design, development and valuation; for their owners – how easy is it to lease or sell them; and for their occupiers – is there enough of the kind of space a modern, growing business now wants to occupy?

Stanojevic issued a call to action for the audience to start thinking and doing things differently when it comes to the office and the workplace. She said: “The advent of hybrid work has dramatically altered this experience for most of us. Simply meeting the average won’t suffice to entice employees back to the office. Something more, dare I say, unbeatable is now the minimum expectation when it comes to our people.”

Stanojevic added: “The traditional office setting is being reimagined to accommodate the growing demand for flexibility and the recognition that productivity can happen anywhere, not just within the four walls of an office. Employees’ performance is no longer measured by presenteeism – it’s measured by output. And this transition away from a strictly physical office and environment is part of a broader change in organisational culture and strategy, aiming to enhance productivity.”

There is everything to play for and a lot is changing. As Laura Oliver, partner at Clyde & Co, put it: “The exciting thing is to see the evolution of where workplaces have been moving towards and where they’re going to carry on moving to.”

Office in the DNA

Some speakers believe remote working remains a huge challenge. “The average home supports the average worker better than the average office,” said Kirsty Angerer, development director at HqO-backed Leesman, outlining recent research from the firm. “It is getting better but we are still in this stage where the home is offering a better experience for specific activities and on the whole as well.”

For James Evans, head of national office agency at Savills, the return-to-the-office debate is now less important than discussions over the type of office a company needs.

“The debate seems to have been raging on for far too long,” Evans said. “Frankly, we don’t actually talk about it that much anymore with landlord clients. There’s generally an acceptance from most occupier businesses that we speak to that the office is a really important part of their DNA, for culture, community and productivity. So the debate is more about how much space, rather than do we need any space. The numbers, the metrics, bounce around, with occupiers saying they need maybe 10-20% less space, but better space. And, pleasingly for landlord clients, that’s generally translating through to a rental premium.”

Many of the shifts have been around flexibility, and office owners have been driven to adapt their offerings. At GPE, flexible and managed offices have become a larger focus over recent years, said director of flex workspace Simon Rowley. That has helped the company to stick by occupiers as they grow.

“There’s a symbiotic relationship between HQ and flex – there’s a lot of value that our HQ business adds to the flex side of our business: credibility, reputation, the infrastructure and admin,” Rowley said. “In many ways, HQ represents the ‘grown-up’ side to the business and flex the ‘youngsters’ who can still teach the grown-ups a thing or two: things like customer centricity; service provision; the value of data; and amenity, as we are working with shorter leases and retention is everything.”

These changes have brought landlords and occupiers closer together. “Covid changed the relationship with landlords,” said CJ Uhure, director of group property at recruitment group Reed. “I spent all day every day speaking to landlords. They became our best friends in the main, although there were the odd few outliers who were not on our Christmas card list by the end of it. I would say there is, broadly speaking, a more collaborative approach to deals and preparedness to do deals from a landlord perspective and an occupier perspective.”

Blurry but lovely

In a joint presentation, Liam Spencer, studio director at Thirdway, and Josh Hewes, founder and chief executive of Blockspace, offered a live example of redefining the office as they mapped out plans for Blockspace’s London base.

“One of our core MOs is this redefinition of the O-word,” Spencer said. “If you look up office in a dictionary, you’ll get a definition somewhere along the lines of a room or series of rooms for bureaucratic purposes. I don’t think anyone in this room believes that to be true. The office is ever evolving. In society you’ve got these shifts that happen, which actually then start to be reflected in offices. So from seas of desks through to the late-2000s beanbags and slides of Shoreditch, now to this really blurry but actually quite lovely point we’re at with something between hospitality, resi, hotels and office.”

For Hewes, the office is imperative in bringing people together, even in a company that offers remote working by default. But it becomes more of a location at which collaboration will happen, he added, rather than the traditional banks of desks.

“Why have an office? It’s a question that we asked ourselves and a lot of peers also asked us, having seen so many successful businesses, particularly in the tech sector, working remote and reaching unicorn status,” he said. “It’s no longer do you have to have an office, it’s do you want to have an office? It became apparent that it isn’t an office, it’s a space.”

There will be offices that, for myriad reasons, are simply unfit to still be used as offices without a radical overhaul. Chief among the challenges is regulatory pressure to improve EPC ratings across properties to grade C by 2028 and B by 2030. EG data reporter Jim Larkin took a dive into EG Radius data that revealed the latter will be a leap in many locations.

“If you look at northern England and Wales, between a third and just over half of all commercial buildings would be fine in 2028, and the picture is more or less the same in southern England,” Larkin said. “But if you fast-forward to 2030, the picture changes. In Sheffield, just 9% of its buildings would be fine. When you really drill down into some of the secondary towns and markets, the figures are incredibly low. Sunderland, Bolton both on 7% and Oldham a lowly 5%.”

The question now will be what a new government after 4 July can do to help asset owners handle that situation.

Larkin said: “There lies an opportunity for the industry as a whole to come together with a post-election government and say to them: ‘This is the help we need. This is what you need to understand, and this is how we need to rewrite the rules in such a way that they’re achievable, but they won’t be an absolute cop out.’ And that will deliver huge benefits for the competitiveness of British industry.”

Good versus bad

That is not the only sustainability issue asset owners and occupiers should be considering. Susan Randall, a sustainable solutions adviser focused on the circular economy at Rype Office, said: “The largest source of carbon emissions in the lifetime of a commercial building is furniture.

“That’s due to the tenancy churn and the tradition of old furniture being disposed of and new furniture purchased every time there’s a change in tenancy.”

Speakers questioned whether some offices are now past the point of being saved. “I think there are lots of offices that probably should be obsolete,” said Darryl Easton, managing director of East On Commercial. “There are lots of offices, the top tier, that have already built in the obsolescence for the next 20, 30 years. I tend to swim in the pool of the middle bit, where a lot of offices, with a lot of effort, can make it to being sustainable and attract the right customers and clients.”

Cushman & Wakefield looked at 218m sq ft of office space across 11 countries and found regulation and EPC rules would leave three-quarters obsolete by 2030.

“That’s pretty alarming,” said Nicola Gillen, Cushman’s EMEA lead for total workplace. “You place that against the shifting needs of occupiers and what they’re looking for as they come in and we already have a disconnect there. But the obsolescence isn’t just about the building itself. It’s about use and it’s also about location.”

Ben Cross, a real estate director most recently at General Projects, agreed. “Location isn’t talked about as much as it should be. You’ve got good stock in good locations. You’ve got good stock in bad locations, which as a fundamental basis is about creating brand, dealing with customer centricity and what the occupier wants from their workplace. And you’ve got bad office buildings in bad locations, where things are particularly challenging.”

The latter two are “projects and opportunities that we should all be exploring in terms of creating dynamic, interesting, mixed-use, multifaceted destinations that people want to go to”, Cross added.

With this degree of upheaval in the market, who would invest in offices? A panel on the outlook for dealmaking was more upbeat than might have been expected.

“There are causes for optimism,” said Alexander Jan, chief economic adviser at the London Property Alliance. “London has been through a tough time, both politically, then with Covid and the global financial crisis. But the good news is that, in comparative terms, London has not done as badly both in terms of what it endured and then how it has recovered.”

And for James Boadle, senior vice-president at Oxford Properties, now could be the time to start spending.

“Sentiment is starting to change to the positive,” Boadle said. “Office isn’t a bad word. It has had its challenges over the past two to three years but it is a fundamental part of our portfolio and will continue to be. The sector has bifurcated, and that is without a doubt. In terms of an investor perspective, you should always try to get in front of the occupational trend. And in the London office sector, for example, those assets of a high quality in terms of location, environmental credentials, amenity and attracting talent to their place of work, rather than forcing that talent into their place of work, those assets are still performing very well.”

Clear the calendar

The event was closed by Bruce Daisley, host of Eat Sleep Work Repeat, a podcast series about remote working and workplace culture.

“Right now, if we’re thinking about workplace culture, if we’re thinking about the way that our offices interact with our organisations, there are two simultaneous facts,” Daisley said. “The first one is that workplace culture feels more fragmented than ever before, and I think that’s worth accepting. But, simultaneously, flexible working has been the most popular change to happen to work, certainly generationally, probably ever.

“People are enjoying not being in the office every day. But there is this strong sense that things don’t feel the same,” Daisley added, pointing to research that highlights a rise in loneliness among different workforces and a survey that shows 40% of UK workers have no friends at work.

His advice? Ditch pointless meetings and presenteeism, and make the office somewhere people don’t find their time wasted.

“The office is a cauldron of connection. It’s a place of interaction, but that’s not how we are currently using it,” he said. “There’s no evidence that working from home is any more or any less productive. Broadly, it’s about the same in terms of productivity. But when we are looking at cultural issues, everyone thinks it’s about offices. And, actually, there’s a big fundamental unanswered question, which is about calendars and meetings. If we want to make culture better, we need to think about how we address those things because that’s how we’ll get more value out of our office.”

Images © Telling Photography