The Wire: Autumn 2020 – Is this the end for office as we know it, and how might this impact house prices

(Estimated read time 6 minutes)

Is this the end for office as we know it, and how might this impact house prices

Like many people, when the lockdown was implemented, I could not imagine a scenario where five months later nearly half the country would still be working from home and that life as we knew it would feel like the distant past.

While the government has been encouraging people back into the office to help support small businesses in city centres, many companies are remotely working efficiently, meaning that returning to the office could be seen as an unwarranted risk by many.

The pandemic has undoubtedly moved the flexible working movement light-years ahead of where it was, with people across all sectors and generations embracing the virtual world with open arms. From the conversations I have been having, many people have found that the virtual world we have found ourselves living in has helped them become more connected. Suddenly the hassles of communicating with people across the globe have disappeared, and as a global network, we are certainly more connected.

But does this new flexible working environment mean the end of the office? Are we suddenly going to see a mass exodus of commuters, and if so, what will happen to property prices within cities and suburbs?

The future of the office

Many people have cited that the mandated remote working that has been thrust upon most of us was the start of the end for the office. However, I can’t help but feel that this is somewhat extremist.

The thought that because most can work efficiently in a remote capacity, businesses will no longer require office space misses some of the most substantial aspects of office life. Offices are far more than just a place to work in; they’re a social environment for colleagues to collaborate, they’re a place where companies cultivate their culture and most of all they’re a separation from our home lives.

Everyone needs to remember that while the remote working experiment we are living in has been a resounding success, these workforces have spent years building strong relationships, face-to-face, in the office.

It is with this in mind that I believe that offices will continue to have an essential place within our futures, albeit I do feel that their role will change within our lives.

Some of London’s largest companies have been indicating over recent weeks that their workforces are unlikely to ever return to the office on a full-time basis. PriceWaterhouseCoopers are expecting ’50 to 60 percent’ of its workforce to flexibly work after the pandemic has passed and I can see this being a trend that develops over the coming months.

During the pandemic, people will have become accustomed to the flexibility and additional time that they have through working remotely, which will have undoubtedly improved the work/life balance for many. That is not to say that working remotely has not also caused a great deal of struggle for many who are living by themselves, or who are not fortunate enough to have a home office or outside space.

Now that people are aware of the alternative of commuting five days a week, it won’t be easy to return to old habits. However, people will still want to return to the office to reap the social and mental benefits offered by this environment.

With fewer people working in the office full-time, it is reasonable to expect that businesses will eventually scale back their office space once social distancing restrictions are lifted. A move of this magnitude could leave substantial amounts of commercial properties vacant. However, as has been demonstrated, the commercial property sector can transform itself to meet the ever-changing needs of the economy, and I would envisage it will do so again.

What impact could this have on house prices?

The impact of the pandemic on our working habits could have a substantial effect on the distribution of our population.

We already have seen new trends starting to develop within the property market. As one would expect, with people being confined to their homes and now likely to work from home regularly, outside space and home offices are moving up the priority list for new buyers. Also, existing trends such as the hunt for good broadband connection are now ever more critical when looking at where to live.

However, it is not just property requirements that are likely to change. If an individual is no longer needed in the office, or perhaps for only one or two days a week, do they need to live close to their office or the city centre?
I would expect that some people will be reassessing their choice to live within a city centre for commuting purposes, especially when their money could go significantly further in more suburban and rural areas. As an indication, moving from south-west London to the south-west commuter belt, saves buyers £390 on every square foot of prime house space that they purchase, according to Savills.

Personally, the pandemic has highlighted the physcological benefit of having nature on your doorstep, which has been echoed in a survey conducted by the Royal Horticultural Society (RHS). The study found that almost three-quarters of people who have access to a garden, courtyard or balcony, say it helped their mental health during lockdown.

With this being said, city life will still be appealing to many, especially when considering the vast amount of social and cultural activities offered in cities such as London.

It is for this reason that I don’t foresee a mass exodus from the city, but rather a slight dilution. The city will always be attractive to the right person; however, the pandemic and flexible working environment could be the catalyst for those looking for better value for money or a less metropolitan setting.

The Guild of Property Professionals recently conducted a consumer survey, interviewing respondents on how their new working situation is influencing their decisions when it comes to property.

What was interesting to note is that nearly a quarter of the respondents believe that the shift to working from home will cause property prices throughout the UK to become more uniform and there will be less of a North/South divide. “Properties within the southern half of the country have always been more expensive due to their proximity to London; however, many consumers believe that it will change if commuting to London is no longer a factor”.

Part of me struggles to see this, as the value of living near London goes far beyond being able to commute easily. However, that does not mean properties prices will not increase outside of city centres where the demand for a different lifestyle and the acceptance of an infrequent longer commute becomes more appealing.

As with investment markets, there is a significant amount of uncertainty as to quite what the impact of the pandemic will mean for property prices. However, it is clear to see that peoples priorities are changing, which from a simple supply and demand model would lead us to believe that there will be some shift in property prices within city centres vs more suburban and rural settings.

Looking more broadly at the shift we see towards flexible working; I would hope that this will only be a significant positive for society. If implemented correctly with a healthy balance between working from home and socialising with colleagues in the office, I can only see us being able to achieve a better quality of life with people having more time to pursue personal ventures whatever they may be. Additionally, there are likely to be significant long term pollution benefits if people are no longer commuting five days a week.

I do hope, however, that businesses don’t get overzealous when assessing their requirement for an office and that they remember that authentic human interaction plays a large part not only within their employee’s mental health but also within the overall company culture.

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