As lockdown restrictions ease across the UK and many workers return to the workplace after months of working from home, 93% of businesses are looking to scale back their office space requirements, a survey has found.
Businesses anticipate reducing their office footprint over the next two years as people move to home working, according to the latest Royal Institution of Chartered Surveyors (RICS) UK Commercial Property Survey.
There was a 79% decline in tenant demand for office space in Q2 and the survey results point to a further deterioration in conditions — 62% are predicting a further fall in rents in the office sector.
Some 64% feel offices will increasingly move out of urban centres and into the suburbs, with respondents saying this will support a move towards shopping locally and a potential revival of local high streets.
Simon Rubinsohn, RICS chief economist, said tenants are thinking about a shift because commercial property in central locations is more expensive, while people are wanting to work more from home and spend more time in their local areas.
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“For a lot of businesses they are thinking about that opportunity to move towards suburban locations. We're looking at a very different model going forward: there may still be a central location but it may just be a lot smaller,” Rubinsohn told the BBC.
The survey also suggests there will be a shift to higher quality office space, with more focus on wellbeing and sustainability.
“We are indeed reviewing our property strategy,” Lloyds bank (LLOY.L) chief executive António Horta-Osório said on a call with journalists on Thursday. “In the short-term we are continuing with the plans that we had before COVID-19 where we are consolidating our property estate to six strategic hubs across the UK.
“When people work together that fosters innovation, that continues to support the culture and the values of the company. When you hire new people, those people need to be with other people in order to get to know everyone.
“In the longer term, we will be working to understand what the future of work and the office looks like.
“While we recognise there will always be a need for offices, as more of our colleagues are able to work flexibly and remotely we are becoming less reliant on office space.
“The type of office space we will need in the future is likely to change to reflect changing working styles.”
Tarrant Parsons, RICS Economist, said: “The latest survey feedback unsurprisingly reflects the significant disruption and uncertainty that emerged across the economy during the lockdown period.
“With demand from both occupiers and investors falling sharply, respondents now anticipate rents and capital values will come under downward pressure while the market adjusts to a drastically changed economic environment.
“In particular, the recent shift into remote working raises many questions across the office sector, with respondents expecting businesses to re-evaluate their office space requirements over the next two years.”