The office is not dead but developers and investors must put their hands in their pockets to cleverly cater to changes in occupier demand and bring people back to the city centre, according to panellists at a Place North West event.
The event was sponsored by DAC Beachcroft, SI Sealy and RoC Consulting and hosted by Place North West editor Sarah Townsend.
The line-up of high-profile speakers included representatives from developers Property Alliance Group and CTP, consultancy Avison Young, engineering and design firm SI Sealy and law firm DAC Beachcroft, as well as publishing house HarperCollins’ regional division HarperNorth and environmental engineer EP3, both of which have taken new office space in 2020.
- Can the Manchester office market recover from the economic shock of the pandemic?
- What needs to change to make offices fit for the future?
- What transport and other challenges does Manchester face when trying to bring employees back to city centre offices?
- Pipeline deals are in the main being put on hold apart from the sub-5,000 sq ft bracket but, while the market is slower, Manchester retains the favourable attributes that prompted high levels of take-up in Q1 2020
- If developers and investors decline to spend money updating their office stock, they could find themselves with empty offices
- Occupiers will continue to pursue a ‘flight to quality’ and adopt technology as offices move towards a health and wellbeing-conscious future
Panel one – ‘Long live the office’
Alex Russell, managing director, Property Alliance Group
Chris Cheap, principal and managing director, Avison Young
Liz Donnelly, legal director in real estate, DAC Beachcroft
Rory O’Connor, director, RoC Consulting
Chris Cheap gave an overview of the current state of the office market in Manchester, saying transactions have largely paused other than in the smaller lettings bracket. Following take-up in excess of 300,000 sq ft in Q1, Manchester saw lettings drop to 76,000 sq ft in Q2 on Covid, he said.
“[After the general election], we were in good shape and then Covid hit. None of the raw materials that make up Manchester’s [desirable] office market went away but people couldn’t get into offices. Transactions dropped off a cliff.”
However, central Manchester, although it was outstripped by the out-of-town market in Q2, is outperforming other cities outside London, such as Leeds and Birmingham, Cheap said.
While the outlook is uncertain, Cheap said the current climate does not signal “the end” of the city centre but means employers will have to be “skillful” in thinking up clever ways of bringing employees back to the office.
Rory O’Connor said that developers and landlords had “become complacent” about offices as a product offering and that Covid-19 was a “wake-up call” that should prompt the redesign of workspace.
Simply providing a safe and Covid-secure environment is not enough and more thought needs to go into how to get people from their homes and into the office safely and willingly, he added.
O’Connor also said there is a danger that, in responding to Covid, companies forget the importance of developing a long-term strategy to address long-term changes in the office market and trends away from traditional office working that had already been starting to have an impact even prior to the pandemic.
Alex Russell said occupier requirements are being driven by a “people-centric” approach and this is supported by the fact that the majority of viewings are being led by HR directors.
“People are the priority. We need to design office space that is going to encourage workers to come into the office. We need collaboration and interaction,” he said.
In future, occupiers will demand ownership of their own desks, Russell said, pointing to the end of flexible hot-desking. He said: “I don’t think you can share a desk in a post-Covid world.”
Russell also spoke about barriers to carbon-neutral office development and said he would like to build a net-zero carbon building “if cost wasn’t an issue”. The outlay cost of retrofitting existing office property is “monumental”.
Liz Donnelly said corporate occupiers are choosing to pause and take stock of requirements rather than “making rash decisions”.
Canvassing the opinions of staff in terms of how they feel about a return to the office and how they want workspaces to perform are a key part of companies’ planning going forward, she said.
In terms of lease length, Donnelly compared the outlook with the previous recession, during which time retail occupiers shortened leases en masse.
“Where there are transactions [happening], they are short term. I can’t see occupiers committing to longer term arrangements. That has an impact on real estate valuation and the willingness of funders to fork out,” she said.
Panel two – Change is in the air
Danny Madden, director, SI Sealy
Genevieve Pegg, publishing director, HarperNorth
Stephanie Cox, director, E3P
David Topham, chief executive, CTP
A ‘flight-to-quality’ being witnessed during the pandemic is being driven not only by investors, but also by tenants dictating the narrative in terms of what they expect from their offices, according to David Topham.
While cost plays an important role for both parties, Topham said he is confident that the changes needed, such as a a renewed focus on wellbeing and reducing distractions, are achievable.
The bigger issue would be addressing connectivity issues in Manchester and other cities, which act as a barrier to getting people back to the office, he said.
“Footfall in Manchester and London is down and in Liverpool it is up because it is arguably easier to get in and out of. We have to concentrate on how we are going to make infrastructure better because that is going to hold cities back,” Topham said.
Danny Madden said lessons can be learned from healthcare projects on how to design spaces to improve the air quality in office buildings and, subsequently, limit the spread of viruses.
Having an effective ventilation strategy that ensures any outside contaminants brought inside can be flushed out quickly is one way of building occupiers’ confidence in the safety of their workspace, Madden, whose company has worked on the region’s emergency Nightingale hospitals, said.
He accepted that there would be a cost to developers and landlords in terms of incorporating systems and technology that would make occupiers feel safer, but warned that the alternative could be empty offices.
“There are a lot of great minds out there and we need to find solutions to some of the problems associated with Covid and the changes in offices. These things will come with extra cost but they will boost occupiers’ confidence,” Madden said.
Genevieve Pegg said HarperNorth’s Manchester HQ, in flexible workspace within Bruntwood’s 111 Piccadilly, is a key part of the company’s growth strategy and diversification away from London.
The office is designed to serve people coming from all over the North and, for that reason, it is important that it is connected through compatible infrastructure, she explained.
While the firm waits to move into the 3,800 sq ft office, Pegg said thought has gone into how to adapt the space to make it function effectively and safely post-Covid.
Meanwhile, when environmental consultancy EP3 moved into its Trafford Park office earlier this year, it did so without considering the possibility of a pandemic, Stephanie Cox said.
Since the outbreak, the office, which is large and open plan, has been reconfigured to make it Covid-secure, and staff have returned as quickly and safely as possible.
Cox said the company’s return to the office has “been driven largely by the needs of younger employees who need interaction”.
“We need to be in the office and have that communication and to problem solve together. We provide innovative solutions for our clients and that is difficult if you are working from home,” she said.
The next Place North West event is Industrial + Logistics on Friday 16th October.