The Subplot
The Subplot | Battle of the burbs, office bounce
Welcome to The Subplot, your regular slice of commentary on the North West business and property market from Place North West’s analysis editor, David Thame.
THIS WEEK
- Working from home: thirtysomethings’ reluctance to return to full-time office work poses a 1m sq ft problem for the market
- Elevator pitch: your weekly rundown of what is going up, and what is heading the other way
NEVER GOING BACK
The million square foot question no one can answer
Mid-ranking staff’s desire to work from home is screwing up office requirements and giving landlords a headache – one that could make a difference to Manchester take-up.
Barings didn’t want to talk about its conversations with Deloitte over taking one floor (or two) at the 180,000 sq ft Landmark building on Oxford Street in Manchester. The word on the street is that having experimented with 35,000 sq ft flexible workspace at Hanover Buildings the firm is now finding it hard to make the transition back to old fashioned leasehold.
Desk by desk
Why? Plenty of mid-ranking staff aren’t keen to go back to work. This isn’t a problem unique to Deloitte, which has already slashed its floorspace need from the 67,000 sq ft it occupied at Hardman Street prior to the Hanover switch mid-pandemic. Unhappily, the process of deciding how much (expensive, long-term) floorspace Deloitte needs is a tricky human resources issue, almost a remuneration issue. Negotiations proceed desk-by-desk in a piecemeal way that make it hard to put a number on what will be needed. Maybe it’s 20,000 sq ft. Maybe 30,000 sq ft. The firm wouldn’t tell Subplot, but we do know it slashed one-third off its London office floorspace so something equally drastic is quite probable.
So hard
That number-crunchers like Deloitte have had some issues – and might be out by a factor of 30% – highlights a much wider dilemma for landlords. A vast swathe of occupiers are in the same plight. Back-of-envelope calculations suggest about 2.5m sq ft of relocation or lease event conversations are in real, live, progress today. Subplot is told many, if not most, occupiers are pondering the wisdom of cutting their requirements by around one third.
The missing million
In reality, once all the sentiment surveys and wellbeing interviews have been completed, that 2.5 million sq ft could turn out to be barely above 1.5 million sq ft. While potential occupiers carry out their well-being studies, and interview individual staff members about their homeworking preferences, nobody knows whether it’s the bigger number or the smaller number. Perhaps 1m sq ft could go missing. Or more.
Your country needs you
The government is trying to signal that a return to work as normal is now appropriate. Dumping the presumption in favour of flexible working, which was to have been included in the Employment Bill, is part of this campaign. The bill, expected every year since it was announced in 2019, is not expected to make it into May’s Queen’s Speech.
Been there, done that
Property people know all about these kinds of problems, which pre-date the Covid pandemic. JLL slashed its footprint by about one-third to take 14,000 sq ft at One Piccadilly Gardens as far back as July 2019. “We’ve occupier clients with lease events in the next 12-18 months and they are all debating how much space they need, doing staff sentiment surveys, floor space use analysis and looking at wellbeing issues,” says JLL office agency director Richard Wharton. “Personally, I feel a lot better coming into the office than working at home.”
Balancing out
Wharton’s guess, and the market’s big hope, is that any downward flex in the floorspace required by professionals will be balanced by an upward flex among tech and media occupiers. “Occupiers who depend on graduate requirement want them in the office, and the graduates want to be in quality office environments too,” says Wharton. The rapid filling up of Bruntwood’s Circle Square is taken as proof: 390,000 sq ft let so far, and work now starting on another 216,000 sq ft.
Rental impact
Landlords are naturally watching anxiously, particularly if their pitch is into the professional services sector. Diversifying into telecoms media and tech, or adding serviced floorspace, is a popular solution for those able to take that route. While there’s no evidence (yet) that rental growth is slowing in response, it can’t be ruled out in some cases. Progress to top Manchester rents of £40/sq ft – thus matching Edinburgh and Bristol – may be slowed, but probably not by much.
It will be an anxious spring and summer for landlords, and a confusing one for office workers and their bosses. One day soon we’ll know how many square feet the new normal genuinely needs.
ELEVATOR PITCH
Going up, or going down? This week’s movers
Developers are riding to the top floor in their efforts to find local council development partners, whilst tech occupiers are waiting for the doors to open in Daresbury.
Battle of the burbs
The battle to be the go-to regeneration guy for Greater Manchester boroughs is now on. Muse Developments, whose involvement in Oldham, Salford, and Stockport seemed to have this wrapped up, is now seeing a serious challenge from Bruntwood, which has added Bury to its existing Trafford tie-up. The deal will help refashion Mill Gate. Muse already had a toe in the door at Bury, at a project in Prestwich, which makes the Bruntwood win that bit more interesting.
Chris Roberts, chief development officer at Bruntwood, told Subplot: “Our decisions on which councils to work with and areas to focus on, are very intentional….But they also correlate with where we had an existing regional presence – for example our workspaces Trafford House, Lancastrian and Station House across Trafford and our links to The Met in Bury.”
An alternative explanation is that Bruntwood is good at talking the language of Tory swing-boroughs. Thus it goes down like a Boris Johnson conference speech in Bury, which elected two Red Wall Tory MPs, and in highly competitive Trafford, but lands like a Boris Johnson bring-a-bottle party in more traditional Labour areas. In such places Muse, with an earthier vocabulary, makes a more comfortable fit.
But for both developers – and others like Capital&Centric, which is moving rapidly into more suburban locations – the outer boroughs promise workstreams with lower risks and easier entry fees than the city centre. At a time of uncertainty that is extremely welcome.
Fears the occupiers won’t come
Worth pausing to note that the surge in high-tech and science property is turning out to be no flash in the pan. The 43,000 sq ft Violet development at SciTech Daresbury is still in its early days – the latest phase is only a few months old – but it has already scored a Chinese and an Australian occupier taking 25,000 sq ft between them. More deals are promised and the more ambitious 180,000 sq ft Ultraviolet development will be along soon.
The deals are a vindication for the Liverpool City Region Combined Authority, which provided a £2.5m loan from its Urban Development Fund along with £5.9m from the Chrysalis Fund. Investors are falling over themselves to get a share of this kind of floorspace and a hugely profitable exit is there for the taking.
Get in touch with David Thame: david.thame@placenorthwest.co.uk | 01544 262127
The Subplot is brought to you in association with Oppidan Life.
Those Bury seats (and Bolton North East next door) are very marginal and are very likely to swing back to Labour next time. I wouldn’t read too much into their current status.
By TonyB
The subheading references “thirtysomethings’ reluctance to return to full-time office work”, but there’s nothing in the article about the age profile being a relevant factor for people to prefer flexibility in working – is the implication that ‘mid-ranking’ and ‘thirtysomethings’ are interchangeable terms?
By Salfordian
Mid-ranking staff in their 30’s for a reason. It comes down to laziness pure and simple when someone does not want to attend the office for a minimum of 3 days out of 5.
By Big Dub
Keep increasing train fares to record level and no wonder people don’t want to commute into work anymore.They simply can’t afford it if on lower salary with inflation rising much higher than wages.
By Tom Smith
So it’s just laziness? Not that fact that some people are actually more efficient at home which has been proven in countless companies in varying roles.
Not to mention toxic office environments.
By Anonymous
As a ‘middle-ranking’ twenty something, let me tell you that suburban offices are not attractive to young people. We want to be in the City Centre; on working from the office days we want to be able to get in by tram and bus and go out for food and drinks after work. We do not want to be commuting round the M60 to an office on a retail park in the middle of nowhere via car.
By C
Home working in my experience is much more productive.
By Anonymous
People assume other people are less productive at home and simply projecting. They find themselves being lazy and procrastinating at home and so they assume everyone else must be like them. In fact most people are more disciplined. The reality is that there is simply no need to commute every single day. Time and money can be saved and worker wellbeing increased with a flexible model of 2/3 days in the office per week. Some days I need to be in the office, some days if really concentrating on a detailed report I work far better from home without the office distractions.
By WFH
What these comments clearly demonstrate is that there is not a one-size fits all for the new normal and we shouldn’t be attacking people’s personal choices. A colleague of mine (50s) demands to work 5 days a week from our new office with limited space. HR asked her why she doesn’t want to go agile. She got mad and told them she hates being “stuck” at home. The next minute she’s mad at our colleagues working from home because she “knows” they are doing chores / childcare in between work tasks. It’s strange, like she’s jealous even though she also has the option. It’s not even a introverted thing. I know two colleagues who are both introverted yet have different views, one who likes the socialising after work on Fridays and the other has her own friends outside of work. Trying to force everyone to the old way is toxic. One thing is for sure the rigid days of everyone in one room for 5 days a week is over. The companies with the most loyal talent are likely the ones who recognise this sooner than later…
By Bootle
C – spot on. If you can walk round the corner from the office to the Britons Protection or Bundobust that’s worth coming in for! Not the case on Airport Gateway South Phase 4 with its “amazing parking ratios” zzzz
By Oppi
Personal experience is of suburban business parks, and its clear to me at least, that they are much less attractive under hybrid working, many less reasons to go in if your are still going to be doing your share of Teams calls. 2nd observation is that big businesses that are highly functionalised by location (e.g. Marketing in Bristol, Finance in Manchester, Tech in Edinburgh) are dominated by conference calls and/or business travel – they too easily slip into hybrid working.
By Rich X
Nothing in this piece mentioned laziness or made any kind of judgment about who was right – and yet it keeps cropping up in the comments as if it sort-of did. Why has “reluctance” apparently been re-coded as a moral failure by many readers? That’s fascinating , no? Some deep Protestant ethic at work here, maybe…
By David Thame