Published in Property Week, June ’20. Pic: Santander’s proposed campus office in Milton Keynes, designed by LOM.
As we emerge from the coronavirus pandemic, it is becoming clear that while lockdowns may ease and scary lines on graphs fall, life will never be quite the same.
A shift in attitudes towards office space looks set to be one of the biggest changes. Having gone about their business via remote desktop, email and video link for the past three months, many office workers in the South East have realised they don’t need to commute into central London five days a week. For employers, this is an opportunity to make bold changes to the function, size and location of their office space.
With the property market having only clicked back into gear in the past few weeks, occupiers have yet to decide how much office space they
will need in the future. But
one option being discussed
in (virtual) boardrooms is the ‘hub and spoke’ model. Broadly speaking, this involves retaining a central London office that’s potentially smaller than the existing space a company occupies and supplementing
it with other premises dotted around the South East.
This gives staff a base closer to home that they can reach by car, bicycle or a short journey on public transport, easing fears about the contagion risk of crowded commuter trains. And it helps companies spread staff out across multiple locations to comply with social distancing.
“Many people aren’t comfortable travelling into London, but want to get out of the house,” says John Avery, director at architecture and workplace design firm LOM. “That is where the suburbs come in to play.”
So what kind of firms will look for suburban hubs and which towns are set to benefit from the anticipated trend?
Office-based businesses of all kinds are currently putting serious thought into the buildings they occupy. In Savills’ recent Office Fit survey, which polled 65,000 clients, 20% of respondents in the South East said they wanted to spend time working from home, compared to 8% before Covid-19.
“This means more people are likely to pop to a satellite office,” says Jonathan Gardiner, Savills’ head of UK office agency. “That will be as relevant to a firm of lawyers as it will be to a start-up.”
However, it is large companies such as law firms, consultancies and financial sector businesses who have the staff numbers and resources to support a fully fledged hub-and-spoke office location strategy.
Many people aren’t comfortable travelling into LondonJohn Avery, LOM
Many property experts think banks are particularly likely to adopt this approach, as many were already rethinking their space requirements before the pandemic.
“Santander is opening a massive campus in Milton Keynes and I suspect there will be a few others like that,” says Jonathan Radcliffe, senior broker at office search website Offices. co.uk. “Rather than building a skyscraper, they will go out of town and build outwards.”
JP Morgan an early mover
Investment bank JP Morgan is one of only a handful of firms to have made a move so far, hiring temporary space in Basingstoke, which has housed some of its City staff since March.
Another sector expected to accelerate decentralisation plans following Covid-19 is tech. “At the end of last year, a number of tech occupiers were thinking about bespoke operations,” says James Finnis, head of South East office agency at JLL. “This was aimed at tapping into different talent pools; Guildford, for example, has become the focus for the computer gaming sector, driven by the [presence of] University of Surrey”.
The South East office market already boasts a large sprinkling of IT, telecoms and pharma companies and Vail Williams partner Guy Parkes says that for firms in those sectors, a move from the capital to other South East locations could provide “an antidote to the war for talent” in London, giving them access to a wider pool of potential recruits.
However, one sector that might struggle with the hub- and-spoke model is creative industries. “It could be harder for creative companies, where staff really feed off sitting next to people who do exactly what they do and sharing ideas constantly,” Gardiner concedes.
For those sectors where hub-and-spoke models do
make sense the location of a company’s offices will largely depend on where their staff tend to live. Many firms are carrying out postcode surveys to ascertain this. Generally, areas to the west and north of London will be more popular than east and south, purely because the latter have a smaller catchment area, only stretching for around 75 miles before hitting the coast.
Finnis predicts that requirements will “initially be small – sub 20,000 sq ft”, which shouldn’t pose a problem in terms of office availability in any major town in the South East.
“Based on how many people commute into Waterloo, my instinct is that a lot of relatively senior people tend to live to the south west of London in Surrey, Sussex and Hampshire,” says David Cuthbert, principal at Hanover Green.
He pinpoints the area to the west of the West End, which includes key office locations such as White City, Chiswick and Osterley, as one that could potentially benefit from Covid- 19-related moves.
Gardiner casts the net wider, saying Savills has fielded enquiries for hub-type offices in location stretching from “St Albans in the north, Reading to the west and Guildford to the south of London”.
Slough could also be a popular option, as it is already an established corporate office location with a mix of business parks and town-centre space.
However, London-centric companies could need a fair bit of persuasion about its merits. “They might have a preconception of somewhere like Slough and not appreciate that it has one of the greatest concentrations of corporates outside of the capital and therefore quality office space comparable to central London,” says Gardiner.
Whatever location they choose, the saving on an office in the South East compared to a similar one in central London is around 60% according to Parkes, who adds that the Winnersh Triangle business park in Reading, which Vail Williams acts for, has seen a spike in interest in recent weeks.
One of the key considerations for occupiers looking to embrace a hub-and-spoke model is whether business parks are the right way to go. In their favour, they are less crowded than town
centres and often have access to open spaces, making them ideal for social distancing. They are also lower-rise with buildings that lend themselves to single occupancy, at a time when having fewer shared spaces may be seen as an advantage.
“People might feel more comfortable with their own front door so they can be completely in control of their environment,” says James Raven, chief executive of Arlington, which owns office complexes including Uxbridge Business Park and Arlington Square in Bracknell.
Some are predicting that business parks will receive a post-lockdown shot in the arm, but other property experts argue campuses can feel quite isolated and lack amenities.
After-work drinks with colleagues might seem like a long-forgotten memory right now, but work-based socialising will return, and companies can’t forget the lifestyle element of office life, especially if they are moving staff away from London.
Amenities, lifestyle and what’s around the office are really importantJonathan Goring, U+I Group
“We have a development in Brighton, which is a fantastic place,” says U+I’s group development director Jonathan Goring. “Amenities, lifestyle and what’s around the office are really important.”
Another asset unique to business parks is their substantial car parking. Savills’ Office Fit survey found that 74% of workers in the South East commute by car and anecdotal reports suggest staff that don’t currently use a car to get to work could start to do so to avoid crowded public transport.
Regardless of where satellite offices are located, access to public transport will still be important if links to London are to be maintained.
“The east to west Crossrail line has already caused a migration of companies further south to places like Slough, Reading and Maidenhead, and St Albans and Watford in the north also have great train links,” says Gardiner.
Whether out of town or in town, flexible space that can be scaled up or down will also be key. “At the moment companies need to accommodate social distancing, but may need less space once we can be more socially close together again,” says Avery.
As people are more likely to do admin tasks and answer emails at home, the focus will shift away from banks of desks and towards collaborative areas.
“Standard, desk-based work can be done quite easily from home,” says John Mulqueen, head of offices for EMEA at CBRE GI.
“What can’t is all the other reasons people go to the office: for collaboration, career development, learning, being seen or driving the culture of the organisation. The wellness and health trends will really be accelerated too, and I think there will be a move away from grade-B space.”
Radcliffe adds: “Businesses will want big, bookable rooms and conference facilities. People will go to these satellite offices to do a specific meeting or task, and then go home.”
While many people have ideas about how hub-and- spoke office models might work, the big question is how many companies will ultimately embrace them. Not everyone is sold on the concept.
Mulqueen is sceptical about firms replacing London space with suburban offices in the long term. “I don’t see the logic in taking an office in Woking or Guildford instead of central London,” he says. “If you’re going to be working from home a few days a week, when you do go to the office you want to be in the centre, part of the buzz. It makes more sense to centralise a company’s efforts in creating a space that attracts their people.”
Some people argue the hub- and-spoke model will only work for certain types of businesses. “It won’t be one cap fits all – we won’t see many firms decamping en masse to the home counties,” believes Cuthbert.
Regardless of how things pan out, property experts agree, Covid-19 has taught businesses a valuable lesson about the need to diversify their office portfolios.
“This kind of scenario will continue to weigh on people’s minds,” says Raven, adding that firms will “consider the real work-life balance needs of all their staff and the operational resilience of having diversity in their real estate strategy”.
The hub-and-spoke model may not be the right solution for all businesses, but it’s something all businesses would be wise to consider post-pandemic.