“I wish we had 10 centres in Cornwall,” Mark Dixon, chief executive of IWG – the world’s largest flexible workspace provider, said at a recent webinar when discussing the shift in occupier demand during the pandemic.
He believes the trend for working “near to home” is here to stay. “The genie is out of the lamp and it’s not going back in again,” he said when explaining that workers – and the best talent – had got used to the benefits of working from anywhere.
The implications for the traditional office sector are vast.
Of course, Dixon would talk up the merits of working from anywhere. With 3,300 centres in 120 countries around the world, IWG has the most to gain from a shift to flexible working. But the numbers back it up, too. Companies had been moving to flexible working practices before COVID struck. In the first quarter of 2020, at the end of which the global pandemic was declared, IWG had its best quarter on record.
While the group has suffered during the pandemic – its share price is 33.7% down on early February 2020 levels, Dixon believes the pandemic has also provided it with its greatest opportunity in its history. The pandemic has been the perfect advert for the benefits of working from anywhere. In the past quarter, the group has signed deals spanning one million new users and have one million more in the pipeline.
Earlier this year, Japanese telecoms giant NTT and UK-based bank Standard Chartered signed agreements with IWG allowing their employees, 300,000 and 95,000 respectively, to work at any of IWG’s centres around the world.
If people are to spend more of their time working from centres closer to home, what does this mean for central business districts like London?
Although it is still advised to work from home in the UK, there is already a vast difference in the number of workers in London on a Monday and Friday than on a Tuesday, Wednesday and Thursday. This suggests the concept of a central head office will not be lost, rather that it will be used differently.
Collaboration and meeting space will become far more important. Landlords will have to work harder in the design and amenity offering to please office tenants. When workforces do come together, it will have to be in space they want to go to, as Dixon argued, and worth the hour or two commute.
And with environmental, social and governance (ESG) issues at the forefront of business decision-making, it may mean more shared on-site amenities such as canteens, meeting rooms and studio space.
It may also mean corporates cutting head office space. Alarm bells should be ringing loudly in the ears of secondary office landlords in London. The best space will continue to be in demand and, given the dearth of supply, may see rents hold up.
The peripheral stock is in serious trouble, however. Thankfully for shareholders, the listed property companies focused on central London offices all have best-in-class portfolios. They do have a lot of costly work to do, however, in providing the space that businesses want to occupy in a world where people can work from anywhere.
QD view – Office needs to Flex muscles