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Office sector in structural change

Neil McShane


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PwC’s new HQ, Merchant Square

PwC’s new HQ, Merchant Square

PwC’s new HQ, Merchant Square

The debate is daily. But the reality is, no one knows for sure. We can only speculate about what will happen to the office sector.

So here are my thoughts. It will survive. Why? Well, for a start, we need each other, in a physical sense. Zoom calls are great. Mobile calls are essential. But we really need that physical connection - that face-to-face engagement in person. There really is no substitute. When we can, many will return to our respective offices and it will be fantastic for us to reconnect in person.

But let's not deny what has happened. The office sector will experience a structural change. More than ever before, people have realised how well they can work from home. Also, many companies will now realise that not only can they drive-down their occupational costs but also offer, and even encourage, flexibility to both their benefit and, importantly, that of their employees. A recent CBRE survey of senior executives reported that 70% of respondents expected that at least some of their employees would become permanent remote workers.

When possible, lots of people will rush back to their offices, but lots won't. Many workers, employers and employees, will be delighted to continue working-from-home, and understandably so. The extra lie-in. The handy commute and no rush-hour traffic. Reduced fuel expenses.

But, like me, many crave the physical interaction of coffee and lunch meetings and a more clear-cut distinction between work and home. Many sectors can function perfectly well in a remote way, but I still believe there is no substitute for meeting in person.

The likelihood is that employers and employees will offer and experience a hybrid model of office and home-working in the future. Employers will be more open to offering employees a choice in where they undertake their work. The office will remain important for face-to-face meetings, but other tasks such as emailing, report-writing and research can be easily accomplished from home. However, companies will need to examine their technological and collaboration tools to ensure that those working-from-home feel well-connected despite the physical separation.

Generally, the office sector in Belfast has been resilient since the 2008 financial crisis with growing demand and considerable rental growth. While development had been hampered by lack of development finance, and high quality refurbishments were the norm, there has been a recent return of speculative development with three major schemes coming out of the ground in The Paper Exchange (155,000 ft2), Olympic House (148,000 ft2) and City Quays 3 (250,000 ft2), all following the recent handover to PwC of its new Belfast headquarters at Merchant Square (250,000 ft2).

However, with the pre-existing turbulence, confirmation that we have fallen into recession and an inevitable bumpy road ahead, we could see prospective developers rein-in their aspirations on scale and timing, if indeed they still go ahead. So what about flexible office space? As a member of Ormeau Baths, I recently went through my induction for returning to co-working space and was really impressed by the systems in-place to maintain social distancing, reduce infection and, importantly, make members comfortable when they do decide to return.

Should these flexible working space operators be worried? I don't think so - I believe flexible office space is here to stay, and, in years to come, I believe it will become more valued and appreciated than ever before. I think lots of employers will want to utilise flexible working space, reducing occupational costs through reduced floor space but also realising that they don't need to look over the shoulder of every employee. The imminent opening of Urban HQ on Upper Queen Street, the newest operator to Belfast's flexible office market, will represent the perfect guinea for this new world order. Who are the winners and losers? Clearly there are mixed-messages with supporting views for a return to pre-Covid normality, but also for flexibility to be the new norm. As I see it, change is already happening and I believe both employees and employers will benefit. Office landlords may take some short-term pain, but good quality well-located office space will always be needed and desirable. Flexible working space is here to stay and will be very much on the radar for employers as they recover from the financial strain of the pandemic and need extra flexibility to adapt. In the long run, I believe it will be a win-win for all, but only time will tell.

Neil McShane is director of commercial property consultancy INPRIO

Belfast Telegraph