The world of work has changed over recent years, hastened by the Covid-19 pandemic. Working from home has become commonplace, as employers relish the lack of overheads and employees enjoy a better work-life balance. So, what does this mean for the commercial property sector? asks Dale Smith, founder and director at Grey-Smith Legal.
The way we use commercial property is changing. With increasing levels of working from home and an increasing shift to online shopping, it may appear that the market is in trouble – however, this is not the case at all. Much commercial property tends to fall broadly into two main categories: retail and office space, and there are positive signs in both.
Office space
According to Mintel, in 2021, offices accounted for more than a third of all commercial property, and this is obviously one area that the pandemic has had a lasting impact on. While lockdown forced people across all industries to adapt to home working, since restrictions have eased, life has not returned to normal in this respect.
Home working has benefits for both employers and employees, and in many cases is thought to lead to increased productivity and job satisfaction.
However, many firms and workers are now preferring to take a more hybrid approach, working at home part of the week and in an office the rest of the time. This approach means that office space is still in high demand and many employers keep a base open for staff to hot desk in. There is also a move to the ‘hub and spoke’ model, with a large centralised base of office space, complemented by smaller regional centres closer to employees’ homes. However, a significant minority of business owners, especially SMEs, decided to ditch the office altogether, which is where a different model of office property has taken off – the co-working hub. While working from home has its benefits, many employees miss the human interaction a day in the office brings, and have taken to creating their own. These co-working spaces provide all the benefits of a traditional office, such as desks, WiFi and (most importantly) colleagues, but on a more flexible basis, and it’s a trend that has risen in popularity as the isolation of WFH has set in.
Retail space
Retail space had undergone a seismic shift even before the pandemic, with the high street repeatedly declared to be in its death throes thanks to the rise in e-commerce. The pandemic only added to this; with nonessential stores forced to close for much of 2020, even customers who had traditionally been reluctant were forced to shop online, with many not looking back. What this means for retail space is that, like its office counterpart, it must adapt to survive. One way we see this happening is through popup shops, which, far from being a passing phase, are now a £1bn dollar industry. High street stalwart John Lewis had another idea. In late 2020, it announced that it was planning on reducing the size of its flagship Oxford Street store, converting entire floors into offices. Furthermore, it also revealed plans to rent its unused storage facilities to gyms, housing projects, and other sectors that had not been as hard hit by the pandemic.
One area of retail property that has seen growth is the out-of-town shopping park, which is predicted to be the UK’s best-performing segment of the UK property market by 2026. Just one example: availability of space at British Land’s, one of the country’s biggest landlords, retail parks has shrunk to just 2.6 per cent over the past year. There are a number of reasons for this, such as cheaper rates, plentiful parking and larger, purpose-built stores which attract a high footfall – all of which make them hugely appealing to retailers.
The commercial property industry had a tough pandemic and has had to pivot and adapt to survive. However, survive it has, and the early signs are that this will continue as landlords lean in to the new normal
