What Will Office Space Look Like in the Future?
In BNP Paribas Real Estate UK’s conference, Repurposing, Reimagining, Reinventing Real Estate, Rob Jones - Real Estate Analyst, Exane BNP Paribas and Stephanie McMahon - Head of Research, BNP Paribas Real Estate UK spoke to Nick Deacon - Head of Office Europe at Nuveen and Paul Williams - CEO of Derwent London about what the future of the office in London might look like. From repurposing buildings to the unique appeal of London, according to these experts, the office is set to go through more changes.
1. What will office space in London look like in the future?
Whether it’s the layout, the time spent at the office, or the connection office space will have to the home, the idea of what the office will resemble in the future has been mulled over and debated endlessly. But the question remains, what is the role of the head office and how will the company encourage employees back on site?
Paul Williams, CEO of Derwent London believes that, going forward, “people will incorporate a more hybrid work schedule, some days in the office, and the other days spent working from home or carrying out certain projects.” “From our feedback” he says, “some want to be back less than others.” However, he is certain that creative thinking is stimulated through in person collaboration. He is confident that at Derwent, the business will certainly have days where it’s all hands in for certain events – “being a design led business, we need people in the office in order maintain the creative spirit.”
Industries will undoubtedly react differently in terms of how they will need and use space, requiring different layouts, with collaborative spaces and drop-in areas that facilitate productivity and teamwork within the company. For example, creative industries or perhaps scientific based sectors, may require more in person collaboration in the workplace compared to the technology or customer service sectors.
The fact remains that although transformed, office buildings are still an essential part of many businesses. And office buildings must be managed well, providing services and facilities that best suit the tenants, able to grow and flex in line with the growth and development of the company. Derwent recently carried out a tenant survey where 51% of respondents said that they were looking to increase head count over the next 6-12 months.
‘‘Everyone has to work hard at satisfying tenants needs” says Nick Deacon, Head of Office Europe at Nuveen. “It is no surprise that the buildings that continue to lease in this market have been able to distinguish themselves through prime location, good amenities or are willing to be flexible with the renter. With less turnover in the future, we may be fighting for tenants and I think the complacency for being able to rent property at the ‘right’ price now is outdated, especially in London.’’
2. Turning buildings Green
As buildings become better adapted and geared up the future, there is an ever-growing concern regarding the need for sustainable infrastructure and amenities. According to Paul Williams, CEO of Derwent London, “Demand will be focused in the long-term on green buildings. It’s likely that we will see a polarisation of space and demand, and people will want space that is adaptable.”
There is a notable push for Energy Performance Certificates (EPCs), particularly with net-zero targets set for 2030, in line with government targets. And the industry is now increasingly focused on the long-term goals of a building, focusing more on the environmental performance. “Anything that is adaptable and can offer green space is going to be popular,” according to the Derwent CEO.
For many in the real estate industry, the challenge is how to transform existing stock into green ones. Many feel that the priority should be repurposing existing stock and working to improve it. But for this to be possible, the real estate industry needs to work collaboratively., “We can make the greenest building possible” says Paul Williams, “but if your occupier is not going to work with you, then you’re going to fail.” The feeling is shared by Nick Deacon, Head of Office Europe at Nuveen. “The industry knows what occupiers want” he says. “We have had conversations for the last decade about ESG and net-zero carbon but right now there is a huge skills gap between the rhetoric and actually applying it.”
The challenge remains as to how to define what is meant by net-zero when there are many companies across all industries claiming to adhere to such standards. Nick Deacon is clear and pragmatic. “We know we have a lot of work to do” he says, “and I think EPCs are almost too simplistic.” Crucially, he expects the company to be doing more net-zero surveys in the future “to try and understand how you can take an underperforming building and achieve your target.”
What must then be considered is how far one can go to improve the energy efficiency of a building, whilst taking into account other commercial considerations. “The investment world is getting smaller, if you are prevented from buying less sustainable buildings then it would naturally mean that the green buildings achieve a premium” says Nick Deacon. By focusing on ESG commitments in a concrete way, opportunities can be created for companies wanting to reach certain targets and allow for a price adjustment of certain assets.
For London in particular, and other cities where the challenge is retrofitting rather than building green, the main question for ESG revolves around how to implement it in the most sustainable way.