Business focus: Office firms feel chill from winter work from home plans

Earlier this month landlords saw encouraging signs that workers were starting to return to London offices. There was no big recovery and property giants were not claiming floods of people were back at desks they had not seen since the Covid-19 lockdown started in March. But, occupancy levels were gradually improving at buildings across the City and West End.

However, in a blow to parts of the commercial property sector, the government this week announced new measures to try and tackle a rise in coronavirus cases. The government said: “To help contain the virus, office workers who can work effectively from home should do so over the winter.”

That guidance will likely mean footfall remains weak in central London for shops, pubs and restaurants, and it will also cause disappointment within the property sector.

Landlords with mixed-use portfolios will be looking at low office occupancy levels, adding to pressures they may already be facing within other parts of their estate, such as retail property, where values have been hurt by the virus crisis and difficulties on the high street.

Charles Begley, executive director of London Property Alliance, which represents a number of landlords across the capital, says: “It is incredibly disappointing, just as it felt we were adapting to returning to work and seeing businesses gradually trying to recover. The impact on central London is particularly acute given its reliance on office workers and visitors, and sadly many of the jobs most at risk will be lower paid ones in the service and hospitality sectors.”

Dan Scanlon, chair of the City Property Association, says: “The reversal in return to the office guidance will stall the capital’s recovery and be a significant setback to those businesses which have worked so hard to transform their workplaces and offerings to encourage employees and visitors back into London and other cities across the UK.”

Scalon, who is also senior vice president, developments at Brookfield Properties, adds: “The City’s competitive advantage derives from its unique concentration of businesses and talent, complemented by an expansive infrastructure and world class retail, leisure, hospitality and cultural offering. Our offices and shared spaces allow for collaboration and connection in a way that is impossible to replicate from home.”

He says that whilst the health and safety of our nation is paramount, “it is essential that government and business work together to develop a long term plan to minimise the spread of Covid-19 whilst progressing the national economy”.

James Walker, head of City agency at property agent Colliers International, warns the latest guidance could impact potential deals in the short term.

He says occupiers are still taking a long term view on real estate “being a fundamental part of their ecosystem”, but adds that the new update might impact immediate decision making, “with some choosing to defer until there is more clarity”.

Walker points out that the government’s measures come at a time when there was a “real desire” from some employees to get back to workplaces.

Some businesses have said there are many members of staff that want to be back in offices, all the time or for part of the week, as working from home is difficult for them.

Various survey results have showed some people also miss talking to colleagues face to face.

What will be frustrating for some tenants, building managers and landlords is that they have invested money in making properties ‘Covid-secure’, and now these sites will not be properly occupied. Those that had returned to offices may have seen hand sanitiser stations installed, and screens between desks, as part of efforts to promote social distancing.

Shared workspace giant WeWork is among firms that say they are more than ready to welcome back businesses to office buildings. Mathieu Proust, general manager of WeWork UK, Ireland and emerging markets, says: “We know that circumstances and everyone’s needs are different, and for some working from home might not be suitable or effective, whether that’s because of their role or for their wellbeing.”

Proust adds: “What is absolutely crucial is that those who do need to go into the office can do so in a space that is safe. We have made significant changes to our spaces to help members and employees stay safe and work as effectively as possible during this time.”

Office landlord Workspace’s asset management director John Robson, says: “We have extensive measures in place to keep customers safe throughout our centres, including social distancing signage, one-way systems, reception screens and enhanced cleaning regimes.”

Landlords remain confident there is still good demand from businesses that want to have bases in central London, but property bosses are aware that more tenants will want flexible space as they adjust to numerous staff wanting to work from home for at least part of the week.

Making it difficult for companies and staff that do want to get back to offices will leave a number of chief executives in the commerical property sector feeling very frosty towards the government.