In early 2020, we experienced the fastest and biggest change in the way we work. Finland has been at top of European countries with highest proportions of remote working during the pandemic. Although the return to the office is underway it is clear there is no return to pre pandemic way of work. Effective communication between employer and employee is essential as organisations return to their offices and manage the change. There are several forces at play influencing how demand is likely to change over the next few years. Savills European Research anticipate the net effect of desk-sharing to outweigh the increased demand for work.
The office remains vital, not only for corporate culture and success, but it will also play a huge role in the recovery, offering normality and reconnection. However, home and remote working will continue, and new forms of workspace are required. Balancing business needs and employee preferences is now the focus.
According to Savills Research, office take-up volumes recovered to 4.9m sq m in H2 2021, 1% above the five-year H2 average, as pent-up occupier demand resulted in higher deal flow in the final quarter of the year. New and refurbished premises are in demand. For example, most of the office space take-up in the London City has been Grade A in Q4 2021-Q1 2022. Occupiers will likely pay higher rent for newer, energy efficient premises.
Drivers of office demand analysed by Savills are desk sharing impact, office density effect, and office-based employment growth. There are differences by markets, and regulatory and organisational challenges in adopting changes. Higher density office stock markets will require a relatively higher level of additional space per head to facilitate more collaborative forms of working. Occupiers’ concerns around managing office use range from under-populated workspaces to managing peaks in the office on more favored days.
Workers will require a wider range of workspace in a post pandemic workplace. Flexibility will increase the attractiveness of the workplace for employees. The need for interaction and active leadership is growing. Companies focusing on the social element of ESG will increase their average floorspace per worker to meet employee expectations. Overall, the importance of health and wellbeing will be higher than it was before the pandemic.
Savills’ model assumes the occupational changes have been implemented by 2026, and from then, office-based employment growth will be the main determinant of demand, currently expected to deliver 1.3% pa. space per worker over the next five years, implying an average 10% fall in demand for office space by 2026.
In early 2020, the decision for business leaders was simple: everyone who could move to remote working. Now decision making is much more complex because there is no clear and simple solution.
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Irma Jokinen, researcher