Offices are adapting, not dying

Belgium’s Befimmo, Germany’s alstria, Spain’s Merlin and the UK’s British Land are all here to stay in the commercial office space, but they may look a little different in a year or two.

Benoît de Blieck
David Brush
Simon Carter
Olivier Elamine
The European office sector has felt the full force of the COVID-19 outbreak. Since lockdowns were enforced back in March, many workforces have undergone a largely successful move to working from home. With many offices empty or operating at reduced capacity, questions are being asked about the future of the sector. Is the time of the office over? Is working from home the new normal?
Although it is impossible to predict the sector’s long-term future and the impact COVID-19 will have ten years from now, it is clear that, in some areas, businesses are beginning to respond. What will be fascinating to watch is how businesses interpret the need for change, how they then choose to adapt and, ultimately, whether we will see long-term winners as a result of these actions.
For some leaders, the future is one of structural upheaval as populations choose to live in different ways, changing how urban landscapes and systems function, and as offices are adapted or located to fit into this totally new environment. Some leaders remain steadfast in their view that we are not experiencing a watershed moment in the future of the office sector; it is but another cycle of its ongoing evolution. And others believe that the future of the sector lies simply in diversifying their offering to accommodate a growing variety of tenants whose work needs and habits have changed.
For British Land, for example, flexible tenancy offerings are one way in which developers will look to meet these changing needs of tenants. The business’ Storey offer “provides a flexible workspace that meets the needs of those looking for a flexible lease in a modern environment,” says the firm’s CFO, Simon Carter.
It’s a similar story at Befimmo. The business is developing its coworking offer with partner Silversquare, and CEO Benoît De Blieck is clear that “from this crisis comes great opportunity” to develop this part of its business. For De Blieck, however, it is about more than just flexible tenancy offerings; he believes that structural change is coming to the cities themselves. This may affect how businesses function and, more specifically, where people and businesses choose to work. “Developers will have to come to terms with the fact that tenants will be after smaller head offices combined with satellite locations,” he says. “We may also see growth in office space in more peripheral cities and areas.”
David Brush, CIO of Merlin Properties, echoes this sentiment. “We will inevitably begin to see a more decentralised workforce. This doesn’t simply mean everyone is working from home, but they may be working closer to home.
Flexible leases and location changes aside, what happens inside the office could be set for a shake-up too. Office operators will have to implement protocols to ensure spaces are biosecure in recognition that social-distancing may well be around for some time. “Offices must come to terms with utilising their spaces differently. Densely populated offices will become a thing of the past,” according to David Brush, CIO, Merlin Properties. Something that Befimmo believes will also be incredibly important moving forward.
De Blieck and Brush’s views come as no surprise. For many, the coronavirus has shown that flexible and home working is preferable with commutes eliminated altogether, in many cases saving considerable time and money. Moving forward, employers will have to consider the growing reluctance for long commutes amongst employees, and office developers and landlords must take this into account.
For Oliver Elamine, alstria’s CEO, however, these changes in worker preference are a force to be considered. He is clear that they have been accelerated but, importantly, were not caused by the coronavirus. “There is no doubt that remote working will be a necessary part of office portfolios in the future. However, we should not confuse the effects of the current health crisis with the economic downturn it is causing.”

alstria's Kastor Tower in Frankfurt

British Land’s Broadgate Circle in London

Merlin Properties’ LOOM Salamanca in Madrid

Befimmo’s ZIN Project in Brussels

“Social distancing, de-densification and fear of public transport will fade away with the memory of the pandemic,” he says. “Offices are a cyclical asset, and our focus is on managing the impact of the recession on tenant demand.”
And the foundation of this argument is sound, at least. The offices being built today are different from the offices being built five years ago and, therefore, it is not a surprise that the future office will be different as well. “Remote working is an additional important variable we need to consider. We will adapt. Adapting to the ever-changing nature of the demand is what we do.”
What is clear from these different outlooks, however, is tenant requirements lie at the heart of the office sector. As these become more specific, it will be the businesses that have built trusting relationships with their customers that will be best placed to thrive post-COVID. For Carter, customer retention will be a product of these relationships, “strengthening stakeholder relationships has always been of the utmost importance,” he says. “It is what makes our places better and significantly increases the likelihood of retaining customers.”
It is an unavoidable truth that the office sector is in need of change. COVID-19 has shown that remote working can work and that the makeup of our offices cannot stay the same. And yet, it seems clear that the office is here to stay. “The office is an essential part of the company culture. For many, it is the relationships that we have built in the office that have led to our success in working away from it,” Carter points out. COVID-19 has not brought about the demise of the office; it has accelerated trends that may ultimately lead to an industry that is more responsive to its customers’ needs.