Entrepreneurs

What Happens To The Office Rental Marketplace In A Year Without Offices?

When your business is about getting companies into the best coworking spaces for their business needs, how do you survive three national lockdowns? That’s been the challenge facing flexible office space provider Hubble since the start of 2020. Founded in 2014, the company was ranked the 26th fastest growing tech company in the U.K. in the 2019 Deloitte Technology Fast 50.

With home working set to feature heavily in the new world of work this challenge isn’t going away, but it’s not all doom and gloom for the company, which has pivoted to meet for the demands of the future workspace, as cofounder and CEO Tushar Agarwal explains.

Alison Coleman: At what stage during the pandemic did you realize that working from home (WFH) was likely to become the new normal.

Tushar Agarwal: Momentum has been building in favor of flexible solutions for some years, but Covid-19 has undoubtedly thrust the concept of a hybrid workplace into the mainstream. When companies such as Twitter and Shopify began making public statements about adopting a longer-term hybrid work policy, the stage was set for a full-blown media debate around the demise of the office. Yet while a lot of strong opinions were shared, there was almost no data.

In light of this, we conducted one of the U.K.’s largest employee surveys on working styles before and during the pandemic, and preferences for post-pandemic. This highlighted shifting perceptions and preferences, and the fact that the longer that lockdown went on, the more ‘conditioned’ people became to working remotely. These insights served to reaffirm our vision, which has always been to create a world where every company has the right workplace to succeed.

Coleman: How did office booking patterns change in the last year, and what does this suggest for companies’ working patterns in 2021 and beyond?

Agarwal: By April 2020 office inquiries had dropped to 5% of pre-Covid-19 levels. Things gradually started to reopen over the summer period, and enquiries came back up to 40% by September, only to be quickly derailed following the second wave of the virus and subsequent lockdowns.

We used the government’s furlough scheme but still had to downsize from 54 full-time staff to 24. But it was knowing that the office market would never be the same again after this crisis that motivated our remaining team to create certainty in a market of uncertainty and help our clients to navigate the new world of work. Since then we’ve been busy aggregating data through regular surveys of employees, landlords, and the wider market to establish the next phase for Hubble in a post-pandemic world.

In January 2021 we did 10% of the business we’d done the previous January, with the market down to almost April levels. However, February 2021 saw a resurgence in enquiries as confidence started to return due to the vaccine rollout and the Government’s announcement of a roadmap out of lockdown, returning to 35% of pre-Covid-19 levels in London.

While the enquiry levels tell one story about the appetite for new office rentals, the actual story is more nuanced. As it stands, 93% of the office market is long-term leases yet less than 2% of our enquiries are now for long-term leased space. Most businesses, large and small, are seeking as much flexibility as possible, whether that’s a shorter contract, the option to flex footprint up and down or take space when they need it on a pay-as-you-go basis. The greater the number of options available, the more that businesses feel their needs are being responded to. Over 70% of office enquiries we’ve received over the past six months have been for hybrid setups. This is the future for most businesses.

Coleman: What does the ‘hybrid office model’ really mean in terms of how companies will use it and benefit from it?

Agarwal: It represents an office model that is distributed across three places; head office, home office, and on-demand third spaces. The latter includes dedicated spaces for specific activities, for example, conference venues and training workshops; specific locations, such as coffee shops, hotel lobbies, and local co-working spaces; and specific seasons; working from overseas, from rooftop terraces over summer, and creative spaces for brainstorming.

What this last year has shown is just how tricky managing the balance was between work and life, but also how optionality can provide the best of both. With hybrid, the one-size-fits-all solution can be discarded and replaced with balance and optionality to suit every person within the organization. Flexibility will go hand-in-hand with hybrid across every dimension of the future of where we work.

Coleman: Where do you expect the sector to capitalize on what could be a potentially sizeable reactive demand in the second half of 2021?

Agarwal: Pre-Covid-19, the industry’s prediction that flexible office space would reach 30% by 2030 felt quite bold. Now, it looks as though this could happen even sooner, which is remarkable considering that the percentage of total flexible office space in 2014 was less than 0.5%. The past 12 months have accelerated this trend and we are now seeing demand for long-term leases plummet, as organizations want their office to flex up and down with the needs of their teams and individuals.

Coleman: Companies are shifting resources towards their workforce, while ties to physical and legacy infrastructure such as flagship office buildings situated in expensive prime locations, will become weaker. How will employers provide for their employees’ needs in the ‘new norm’?

Agarwal: Firstly, company HQs will be turned into places where people find it valuable to come. They will be repurposed to provide a base for the sort of work people want to do together, for example, collaborating, building relationships, training, meeting client meetings, and socializing, with provision of space for quiet, focused work for those unable to achieve that environment remotely.

Secondly, employers will implement better structures to improve the experience of employees working remotely. This might be through direct investment in the WFH experience by contributing to running costs such as rent and bills, and upgrading equipment, and by providing access to some of the amenities and perks normally found in the office, such as fitness classes, craft coffee, cocktail parties or other creature comforts.

The best way for businesses to attract and retain the top talent is to recognize that everyone is different and allow their teams to work in a way that makes them happiest and most productive, while balancing the cultural needs of the organization.

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