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The impact of lockdown on commercial leasing

By Andy Hurt
17 August 2021 | 1 minute read
The impact of lockdown on commercial leasing

 The growth in remote working and distributed workforces began long before the COVID pandemic. But lockdowns have accelerated the trend, making it a necessity rather than an option. Now, with half of Australia in lockdown due to the latest Delta outbreak, and almost three quarters (72 per cent) of employees hoping to continue working from home post-pandemic, there will be a long-term impact on office leasing.

For businesses embracing the hybrid working model, the key to success will be to drive meeting equality between those in meeting rooms, and those who are anywhere else. This will impact both building owners and the businesses that lease them. These are some of the changes we can expect to see, and the ways that organisations and commercial building owners will need to adapt.

  1. Downsizing of premium space needs

 Many organisations will likely downsize their building commitments, leasing less square meterage than before, resulting in lower demand for traditional office spaces. This will particularly apply to premium office space in city centres. KPMG found that 83 per cent of organisations don’t plan to maintain their current leasing strategies and 58 per cent will be seeking more flexibility in their leases moving forward.

Co-working space will become more popular as the as-a-service/on demand trend continues, with businesses reluctant to pay for facilities they aren’t using and wanting the flexibility of instant scaling. If your business is forced to shut physically, relocate or pivot overnight, you won’t want to be stuck paying for months or years of empty space.

There will be less wasted space, with intelligent booking systems ensuring optimal use of all areas. This will also help manage the higher hygiene requirements during and post-COVID, preventing overcrowding and ensuring that higher traffic areas receive regular cleaning. Indoor air sensors can measure air quality, and this data can be combined with occupancy analytics to ensure optimal ventilation strategies.

  1. Grouping by use

Commercial office space owners will need to offer more flexibility and customisation to clients in future. Because workplaces will no longer be tied to a specific location, workplaces will in the future be increasingly grouped according to activity and use. Different workstyle personas will also be relevant. People in the same roles in the same departments may have very different behavioural workstyles that affect how and when they use technology, or whether they communicate with colleagues digitally or in-person.

Different departments may work from different locations. KPMG predicts that head offices will "evolve into teamwork and collaboration hubs that drive organisational productivity". For example, why locate the accounts department in the most expensive location in a city, when they don’t interact with customers and can collaborate remotely with other departments? Many organisations already outsource accounting or legal, so are accustomed not to having an on-site team.

  1. Accommodating for hybrid working

With future employees expected to do a mix of on-site and off-site work, office space will need to be adapted for hybrid working. There will likely be more sharing of spaces and hotdesking as employees attend workplaces on different days, but this will require careful attention to hygiene. Although COVID lockdowns have driven an increase in video-enabled conference rooms there’s still a long way to go. Research indicates that after the pandemic, there will be 6-7 times as many remote workers, creating an unprecedented demand for video meetings. Nearly 30 per cent of meeting rooms will be video-enabled by 2025, up from just 6 per cent in 2019.

Building owners and facilities managers will need to account for higher cleaning and maintenance budgets for privately leased spaces and common areas. There are already solutions using sensors to detect hotzones of high contact, such as door handles, light switches and lift buttons, and can automate and monitor cleaning schedules. 

  1. Enabling virtual communication

The office space of the future will be designed with collaboration and videoconferencing in mind. According to the Frost & Sullivan research, videoconferencing is the second highest investment priority for IT after cloud-based apps. This will mean special configurations and equipment, including acoustic and lighting considerations. Videoconferencing equipment will need to be always accessible/always on and plug-and-play. There’s a need for professional grade technology that helps people command the conversation, no matter where they sit. It’s critical that those working remotely aren’t overlooked or seen as "second class" colleagues in a hybrid meeting, with a mix of physically present and remote staff.

According to Ovum research, 95 per cent of online meetings start late due to technical issues, costing millions in wasted time and productivity. Both software and hardware need to be fit for purpose: reliable, high quality and easy-to-use, so staff aren’t spending hours each week waiting for the tech guy to fix cables and connections. With business travel never expected to return to pre-pandemic levels, the virtual meetings that replace them will need to offer the same quality of experience. This means high-definition video and audio, with participants clearly lit, and without awkward technical issues and disruptions. 

  1. More tenant/landlord collaboration

Another prediction is that tenant businesses and landlords will increasingly come together to shape the future of work and workplaces post-COVID. This includes collaborating to update workplaces and make them more flexible as business needs evolve. As-a-service and OPEX-based models will thrive, with more of a focus on Rooms-as-a-Service (RaaS) and Hardware-as-a- Service (HaaS).

This will be important as virtual meeting infrastructure is increasingly integrated into buildings as a permanent feature, with renovations and new building design taking into account the need for videoconferencing facilities. Businesses will also want more data and analytics around the way people interact with their workspaces, which means embedding smart sensors and using IoT and AI to deliver insights.

Organisations that manage to harness these trends - both those that own buildings and those that lease them - will enjoy a significant competitive advantage as the world emerges from the current crisis.

Andy Hurt, MD, ANZ, Poly   

The impact of lockdown on commercial leasing
Andy Hurt reb
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