We know only one thing for sure about offices after the pandemic: they will be smaller. HSBC says it will need 40 per cent less space in the long term. Lloyds Banking Group wants to trim its premises by 20 per cent within three years.
How people will work within these diminished domains is anybody’s guess. Chief executives have feverish plans for co-working spaces where long-parted colleagues can rekindle the flames of collective purpose. Hot desking, which most workers find irksome, is on the agenda. It is the likely trade-off for regular homeworking, which many now prize.
Before the pandemic the financial services and legal businesses that make up roughly two-fifths of tenants in the City of London resisted working from home. Some of these workforces will return to offices en masse if vaccination conquers coronavirus.
But the majority of City employers concede a full week in the office will be a thing of the past. Not least, this will allow them to save money. Space reductions at banks will be at the steeper end of the scale, reflecting pressure from loan losses and low rates.
Downsizing is also expected among lawyers. A survey of City law firms by researchers at Green Street found those looking to shrink space outnumbered those that hoped to expand by two to one. On a net basis, demand for space may drop about 15 per cent. Those findings fit with expectations for declines in demand for the wider London office market in coming years.
“As businesses adjust to lower space requirements we expect a rapid reset that will complete within three years,” says Peter Papadakos, managing director at Green Street.
The City is accustomed to such tidal ebbs and flows. Central London vacancy rates hit an all-time high of 13 per cent after the recession of the early 1990s. Vacancy rates are expected to peak at 10 per cent in the next couple of years in line with the aftermath of the financial crisis.
Landlords can expect rents to fall. Offices with scant local amenities and transport links will see particularly weak demand.
If hot desking prevails, members of workplace cliques will co-ordinate their office days. Lone risk takers will treat commutes as Russian roulette, not knowing whether they will sit next to an ally or an enemy. But after months of daily isolation, company of any kind may be appreciated.
The Lex team is interested in hearing more from readers. Please give us your vision of post-pandemic office life in the comments section below.