You may not realise – or even feel it – but you may have been getter closer to your colleagues in recent years. Office space has shrunk since the financial crash of 2008 as bosses looked to tighten budgets by cramming workers together.
Each person now occupies about 80 square foot on average, compared to up to 140 square foot before the financial crisis. Workers sit on average 4ft 6in to 5ft 2in apart.
That might prove a challenge as workers start trying to go back to work after the lockdown, under strict social distancing measures which require them to be 6ft apart.
Yet many may not be going back at all, even if rules are relaxed following the review next week. The mass experiment into working from home has proved surprisingly easy for many and bosses are now questioning whether they could make a make a more permanent shift at a time when costs cuts are needed.
Some experts predict office demand could fall as much as 20pc as part of a potential revolution in working habits that would have major implications for landlords and their investors, workers, transport and cities – as well as family and community life.
“The traditional approach of ‘build it and they will come’ – I don’t think that will fly anymore,” says Lee Elliott, global head of occupier research at the estate agent Knight Frank.
Only about 4.7pc of the workforce worked from home during 2019, but that shot up to almost half of the workforce during April under the coronavirus lockdown. Video-call service Zoom’s members have rocketed 20 times to 200 million.
With the pandemic starting to ease, bosses are starting to plan workers’ return to offices under strict infection control. Sensor-activated hand sanitisers, temperature checks, staggered shifts, one-way staircases and even traffic-light systems to go to the lavatory are all on the horizon.
In China, companies have hired private transport to get their workers to the office without the human crush of public trains. “Caution may reign into the autumn, given the risk that the virus infections reaccelerate,” says Ed Walter, global chief executive of the Urban Land Institute.
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Caution risks turning into aversion and companies cutting out the office, accelerating a pre-existing shift towards more flexible working to benefit family life. Germany is planning to bring in a right to work from home law, in a sign of a change of attitudes sweeping the globe.
“The notion of putting 7,000 people in a building may be a thing of the past,” said Jes Staley, the chief executive of Barclays, which has vast offices next to rivals in Canary Wharf, speaking last week after announcing the group’s financial results. “There will be a long-term adjustment in how we think about our location strategy.”
In remarks likely to ring alarm bells among landlords, several bosses echoed his thoughts in comments to The Telegraph. “I have no doubt that when everyone is back to work there will be more people working from home,” says Mark Read, the boss of advertising giant WPP, which globally employs 107,000.
Lord Wolfson, the chief executive of Next, said: “All of us, myself included, have learnt that there is work that can effectively be done from home. My guess is that working practices will change irreversibly going forward one way or another.” For the first time, some of the work Next does from call centres is even being done from home.
Vodafone UK boss Nick Jeffery said: “In just a few weeks we enabled more than 90pc of our 11,000 employees to work from home. We’ve proved that our network supports home working on a mass-scale. The last couple of months has required us all to rethink the design and purpose of our offices.” Pascal Soriot, chief executive of the pharmaceuticals giant AstraZeneca, is also considering more home working for his team.
Darkening economic clouds are likely to accelerate the shifts. The UK is in recession, with economists predicting that GDP could fall as much as 14pc-25pc during April to June. British Airways’ plans to cut up to 12,000 jobs are ominous. Unemployment is expected to rise by around 1.5 million to roughly three million this year.
Office costs are typically as much as 8-15pc of a company’s budget, and are seen as an increasingly easy cost to cut. That would heap pressure on commercial landlords who are already struggling with plummeting retail portfolio values.
Signs of strain are emerging in the office sector. The major UK owner Landsec received 86pc of quarterly office rent due five days after the March 25 due date, compared to the 98pc it had received by that point in 2019. European Real Estate Investment Trusts in the office sector have been trading at an 18pc discount to asset values, in a sign the market expects asset prices to fall.
Yet there is caution it is far too early to call the death of the office. Bosses still see the value in workers getting together to share ideas and feel part of the company, at least some of the time. “The office will be a choice for people rather than an obligation,” says Elliott.
“As a consequence landlords need to create an experience in the workplace that compels people to use it. I don’t necessarily see occupiers needing less space; I think they will need different space.”
Andy Pyle, head of real estate at KPMG, believes companies could start to spread their office space more around the country, putting workers in smaller offices in commuter belts, or even within blocks of flats. “Overall my guess would be that demand could fall around 10-20pc on an individual company level.
“But it depends upon the way in which people move towards a distributed model.
“There will be winners and losers location by location. I am still a big believer of major cities, particularly London, as a massive draw for talent.” Demand for flexible leases is also likely to grow so that companies can rapidly respond should the pandemic return.
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Chris Grigg, chief executive of the major UK landlord British Land, is, perhaps unsurprisingly, bullish on the future of offices. Many predicted the decline of high-rises and air travel after 9/11, he notes.
Yet neither happened. Tech companies, who have invented the tools for working from home, are among the most prolific office users around. “Trying to run a business without seeing people is really hard,” he says. “Judging whether people are healthy, happy, productive, buy into the culture.”
Marcus Geddes, head of property at LandSec, whose portfolio is 50pc office space by value, agrees: “This great workplace experiment has removed some resistance to home working. But it’s far from perfect. I don’t see the grim reaper falling on the office market just yet.”
Additional reporting: Hannah Uttley, Laura Onita, Michael O’Dwyer, Chris Williams, Lucy Burton, Matthew Field, Tim Wallace