Hello and welcome to Business Daily from the BBC with me, Manuela Saragasa. Coming up:
Does the office have a future after the coronavirus?
We certainly wouldn't have made this move. If we hadn't had the pandemic we will still get together on a periodic basis
But we don't see the need to have permanent real estate of our own in the city
And what does that mean for the future of cities?
There will be less demand for big office towers and companies will decide it's more efficient to have more people work remotely
But there's very little indication that young people who have driven the urban revival will move out of cities
That's all here in Business Daily from the BBC.
Now, it's Monday morning so we sent out our reporter Elizabeth Hotson to check out what the
coronavirus rush hour looks like in London's financial district.
I'm walking down Bishopsgate, the main street running through London's famous square mile
Up until a few months ago,
it was the beating heart of the UK's financial services district and this area would have been packed with bankers and office workers
But since lockdown measures were introduced here, the area has been a shadow of its former self.
The bars are closed. The banks are running on skeleton staff and most workers are staying at home
And that means many of the skyscrapers around me are largely empty.
This is the home of many of the newer additions to London's skyline
controversies once raged over the architectural merits of skyscrapers
such as the gherkin and the cheese grater when bigger taller and more expensive always seemed to be better.
And why not? Office space was always in demand and billion-dollar building projects were, well, two for a penny
But the coronavirus pandemic has thrown those old certainties into doubt
I've moved down the road to number 22 Bishopsgate. It's a massive new building due for completion later this year
There are a few construction workers there now and the 62-floor tower will be London's biggest and tallest office block
With space for 12,000 workers, along with innovation hubs, a well-being retreat and a climbing wall
The plan was for insurers, law firms and US stock exchange Nasdaq to fill the vast space
but according to the Financial Times, 40% of the building remains unleased.
The building's owner is confident that number 22 will eventually be full, but with many more office workers finding they can work from home
the question is whether giant office buildings like this really have a
future.
Elizabeth Hotson.
Well,
there are plenty doubting the future of the office. The British bank Barclays said recently that the time of putting
7,000 people in a building may be a thing of the past. Facebook and Twitter too are among those making homeworking a permanent thing
Mike Hampson used to work in an office, not far from where Elizabeth was standing.
He's the CEO of Bishopsgate Financial, a financial services company.
It's based in the city of London - or it was until last month. Friday, we moved everything out
We were planning to move offices just before the shutdown happened and when the shutdown came in
We started to get used to working in a different way and realized that actually we didn't need it
So are you never going to go back into an office space?
No, um, I mean the bulk of our people will work either on client projects
So either on client sites or from home
in fact now is where most of them are working and our sort of smaller central team will work
remotely from home. In some cases, where they don't necessarily have the best home set up
we're going to get them lounge space somewhere, but no we don't plan to take another office
It's quite a bold move to make I mean, I can understand that people are getting used to you know
working from home at the moment, but it's quite a dramatic move to make
very suddenly within such a short space of time. Yeah
I think it's one of those things where you know, we certainly wouldn't have made this move if we hadn't had the pandemic going on
But because the whole world has had to move effectively to a remote working
environment it's acceptable to all of our clients and to the people who work for us,
they realise that things can work in this way.
We will still get together on a periodic basis
but we don't see the need to have permanent real estate of our own in the city.
How much is it saving you as a company not having office space? It's about 25% of our fixed costs
So it's hundreds of thousands over the over the course of the year. And as I say, that's just the company the
individuals are also saving thousands after tax on their commuting.
Of course, this probably works because of the nature of your
business, I imagine that some people listening would say well we we just could not do that
We need that sort of face-to-face time over a desk in a communal space
Yeah, I understand that people would say that. Our clients are the banks, the large banks, and I did
an informal survey just 10 days ago across 25
senior people in different banks based in the city and and big names that you would recognise
With one exception, they all said they're evaluating their ways of working going forward
50% of them said that they were immediately going to be moving to a
more remote working and on average it looked like it was going to affect something like 50%
of staff not necessarily permanently working from home, but significantly more time at home
Therefore that reduces the amount of real estate they need so I think across the industry
We're going to see that happen. And I think there are many many businesses that previously didn't think they could work this way now
they've been forced to use the technology and the tools and to get used to working in a different way
and all of the world has moved at the same time, they're recognising, yes, we can do this.
So if you look at the skyline of London now, and you see all these skyscrapers,
some of them are still being built, office, retail space...
What do you think?
Well, I certainly wouldn't want to be in commercial property right now. The happily officeless Mike Hampson. More from him later
What do those who are in the business of developing and renting out commercial property have to say?
Luke Philpott is joint CEO of DaVona Cresa, a London commercial property agent
He helps businesses find and move into new office space
I asked him: are any firms moving, and what's happening to leased office space in London anyway? Moving, probably, yeah
Yes, they are moving
um, but obviously the numbers are incredibly low at the moment. If you look at the the anticipated data in Q2
which looks like central London is going to feel a hit of in excess of 88% drop
from the same period in April and May of 2019
Wow, that's huge, what are the implications? Is that
because businesses have decided that actually they don't really need any office space any more people can work from home and this has set a trend?
What's all behind it?
I think fundamentally what's behind it is the lockdown at the moment
What you've had to deal with is a period where people have been asked to stay at home
you can't carry out an office move without ultimately looking at some offices and
I think the pendulum hasn't swung as far as people will, on a large scale,
believe that they don't need an office going forward. This has certainly proven to a lot of people who are skeptical about levels of productivity
reliance of technology it's proven to a lot of those people that actually there is a very
appealing workaround for large segments of the economy
But that being said, there's also a huge amount of people we speak to that that are desperate to reopen their offices again
because there is something around that face-to-face
interaction and collaboration that comes with it that you can't replicate over a monitor. The role of the office going forward
probably becomes something that is fundamentally redesigned
and acts more as a melting pot for collaborative ideas and creation.
That would imply
that less office space is needed and in
cities like London at the moment, in many cities around the world that have big developed central business districts,
you have hundreds of thousands of square feet of office space being developed at the moment
perhaps there might be a crash in the offing? It's one possibility. You know, I can't argue with that. It is one possibility
I think at the moment though, you obviously have social distancing which is right
now you could shed half of your staff or ask half of them to work from home
and yet still fundamentally need roughly the same amount of office space as you did pre-covid
Because of the social distancing measures that certainly before a vaccine is available
we all have to adhere to if you have any notion of reopening your office. Commercial property agent
Luke Philpott. Others in his sector are actively campaigning to get employees back into the office
while hoping, like Luke, that a vaccine might bring back some normality to their line of work. Among them, Tom Carroll.
He works in corporate research at JLL, the commercial property developer.
He argues that talk of the demise of the office is premature. We're seeing a lot of companies across different industries
Look at how they might start to re-enter the workplace, mostly in a phased and gradual way.
Many companies are talking about reduced office capacity in the short term, targeting 10-20%
perhaps moving up to 40-50% as conditions allow
We're also seeing companies increase the amount of space per person to adhere to social distancing
But the assumption there is that companies will want to re-enter office space and that's the thing, isn't it?
We've had quite a number of big name companies, Facebook, Google, saying we're going to make working from home permanent
That must have given you a couple of sleepless nights at least
Well, I think you know ultimately it's easy to work from home when the alternative is not to work at all
But with the latest survey data, we're getting from employees is that they want to mix the majority miss being in the office
Um in particular, they cite the human interaction the social aspect the collaboration with colleagues going forward
It's likely to be a mix
We're going to see for sure a focus on understanding what remote work and working from home can do for an organization
Which roles are appropriate but the data shows a bit of a mixed picture around productivity while working from home
People have had very different experiences
Based on their personal circumstances, be that caring responsibilities, be that the living environment, that the different research
from Asia shows for example that you know when you've got a much smaller average living environment and space where you perhaps don't have
the environment for a home office, that can increase stress and pressure on individuals
For those in a shared living environment the idea of permanent homework has been difficult
so there are a real mix of outcomes here and I think we'll start to see organisations think differently about how they work in a
more distributed way and how they mix the office environment with more remote working. Tom Carroll.
All of this of course has potentially profound implications for the future of central business districts everywhere:
those areas of cities where businesses cluster in high-rise office buildings. Will they become ghost towns? Richard
Florida is professor at the Rotman School of Management at the University of Toronto in Canada.
He studies cities and urbanization. In the wake of pandemics and crises, we often get these dystopian takes.
It happened after the terrorist attacks of 9/11, when people said people would get out of New York City, would abandon New York City
It happened in the wake of 2008, and I know this well because I actually wrote about it for the Atlantic
My editors actually came to me and said would you write a piece on how London and New York are going to collapse?
And I said, no, I'll never write that piece. In fact, in the wake of the 2008 financial crisis
London and New York will come back even stronger
Okay, but more and more people are working from home
and you start to question whether you actually need to be
near your office if you can work from home, and why do I have to stay near
my office if I'm not even commuting? I mean obviously the shift to remote work will stick.
So about 40% of the workforce knowledge and professional workers can remote work. Let's say that
20% of us decide that remote work is something we like and that increases. The people who will be pulled out of major cities
will be older people who are more vulnerable
and people with families who feel that their children are,
rightly or wrongly, whether children are at risk or not, feel that their children are at risk
There's very little indication that young people who have driven the urban revival will move out of cities
In fact, every indication is in the wake of previous pandemics young people have flocked the cities. Why?
To establish your career in finance and entertainment and media or technology, you need to build a personal network.
You also have to find people to be friends with and people to marry and form a family with.
What may happen, and I think I think you're right
there will be less demand for big office towers and companies will decide it's more efficient to have more people work remotely
but they will still have offices
and meeting rooms, and young people who live in cramped quarters with roommates will still require urban offices
But what does that mean?
The problem with our cities, and I wrote a whole book on this called The New Urban Crisis, is that London, and New York,
and San Francisco, and Paris, got horribly
unaffordable. Well, we now have an opportunity
to make London and New York and Paris more affordable.
Younger people can afford to live there, middle-class people can afford to live there, artists and creative people can afford to live there
less advantaged people can afford to live there.
Let's say you're correct. The kind of city you're talking about is going to look and feel very different from the way cities were
pre-coronavirus. Yes. I think there'll be issues with trains and transit. So one thing that we'll see
is a lot more traffic congestion.
I don't think London and New York are going to look dramatically different, but there will be more bike lanes
One of the things we tend to see in the wake of past pandemics
is we double down on providing better open space. We develop new and more sanitary construction technologies.
We build healthier buildings, but our cities are not going to look radically different.
Ultimately, though, isn't it all about the price of commercial and retail space in town? It's going to get cheaper. I mean,
that's a good thing. Cheaper retail and commercial space
and cheaper housing is a great thing. It's going to get cheaper because there's less demand for office space.
It's going to get cheaper because there's less demand for physical retail and people are buying stuff online.
And it's going to get cheaper because the global super rich are going to leave cities
for their country abodes and beachfront houses, and because some families will leave cities
But there'll be lots of other people the people who drive cities, young people, ambitious people, entrepreneurs,
immigrants, and artistic creatives, who will flock to city, so
look, the bright side of this pandemic is it finally allows us to arrest
the changes that were really threatening our cities: uber-gentrification, the invasion of foreign wealth, the turning of condominiums and real estate assets
into investment assets rather than housing for people, the incredible insane inequality of our cities.
You know, I think this is the opportunity for great cities to get back, you know, Jane Jacobs, the greatest urbanist of all,
said urban development requires cheap and affordable space.
That's what the urban gentrification wave removed from our cities. The pandemic can help reset our great cities for a new wave of growth.
Professor Richard Florida. Given those points, I had a final question for Mike Hampson:
As we heard earlier,
he's given up on having an office altogether and all his staff is now working from home.
Was anyone a bit disappointed about this in your office?
So, we've done a couple of things. So I did ask all of them before we took the final decision, to
first of all, list the 10 best things about working remotely in lockdown. And also what things would they miss?
No one was negative about it. Everyone is very positive about the fact they're saving a lot of money on commuting.
They are positive about the fact they're not spending money on lunches and coffees. They find our work environment
actually
very
usable
We had the tools, we were one of those companies that we had the tools, we happened to use Microsoft Teams,
but we'd never really used it in the office environment and suddenly we were plunged into a world where we had to use it
and we're talking to each other throughout the day either as a team or one-to-one on sort of video chats and,
you know, people have just fallen into that way of working. And as I say, I think probably the biggest positive for people is
no commuting in and out of the city and saving a lot of money.
But also: no meetings over the, you know, the tea machine or the coffee machine at work all that kind of
natural interaction
that would otherwise happen - ideas that get formed in that way. Sure,
So, definitely, once we're allowed to, we definitely plan to get together on a regular basis
We will be having physical team meetings and get-togethers
We're not sure how frequently, but sort of weekly or bi-weekly, but those informal chats, again, the tools have all
matured to a stage where it is actually possible just to... you can see if someone's at their desk, they're signed in
you can literally on one click of a button open up a video chat with them and touch base and actually some of the
conversations are, in many ways, easier because you haven't got everyone in the office around you listening in.
Mike Hampson. Good for privacy then, but perhaps not so great for your social life. Send us your thoughts.
The Twitter handles are @bbcbusiness or @ManuelaBBC. Today's producer was Edwin Lane.