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 brown buildings to the unique appeal of London, according to these expert, the office is set to go through more changes.
The idea of what the office will resemble in the future is one that has been much talked about and mulled over. What the layout will be, how many days people will spend inside the office building and what connections the office building will have to the home and third places are all subjects which experts across the world have been debating. The overarching question is rather to know what the role of the head office is and how the company can encourage employees to come back to the 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. Being a design led business, we need people in the office in order maintain the creative spirit.”
Indeed, various industries will react differently in terms of how they will use space, for creative industries or perhaps science or medical based sectors, the need to be in the workplace is far greater than industries such as technology or IT. What’s more, different businesses will require different kinds of layout, with collaborative spaces and drop-in areas that facilitate the exchanges that drive forward the specific activity of the company.
In this way, the office building, although transformed, is still an essential part of many businesses. 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. “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.’’
Brown buildings turn green and resilient
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, “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.”
Indeed, people are now increasingly focused on the long-term goals of a building, which encompass their environmental performance. More and more, there is a push for Energy Performance Certificates (EPCs), particularly with net-zero targets set for 2030, in line with government targets. Paul Williams affirms this idea by stating, “Anything that is adaptable and can offer green space is going to be popular.”
For many in the real estate industry, the challenge is how to turn brown buildings green. A number of actors feel that the main focus should be on repurposing existing stock and working to improve it. To do this though, the real estate industry as a whole 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.”
Nick Deacon affirms this by saying that, “The industry knows what occupiers want. 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 question remains then as to how to define what is meant by net-zero, as there are many companies across all industries claiming to adhere to such standards. Nick Deacon clarifies this by saying that, “We know we have a lot of work to do 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 you 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 the main question for ESG revolves around how it is implemented in the most sustainable way.
How does London compare to continental Europe?
Due in part to Brexit and in part to the position the UK holds between America and Europe, London as the capital of the UK is in some ways set apart from continental Europe.
In terms of how London has managed the return to the office, it seems to have been managed differently from other countries in Europe. Whilst in Paris or Berlin office occupancy rates are rising, in London there is a still a cautious attitude when it comes to getting back to the office.
However it seems that London is still destined to bounce back, with new more flexible ways of managing offices and an ever increasing focus on ESG commitments. With clear data and analytics becoming more and more important, the future of those in an office looks bright.