Since ‘lockdown’ began, a major dividing line seems to have been those who have appreciated working from home and those who much prefer being in an office. Of course there are many roles and jobs which can only be done on site, but in financial services that is not in most cases true.
What will happen when the current restrictions - if that is the right word for the Government’s muddled policies – on travel, protective covering and gatherings - finish? Even though right now COVID-19 seems to be making a comeback, there will be a day when it is over and life returns to normal.
Many people have said to me that working from home is more efficient for them. It cuts out commuting and travel time, and webinars are very nearly as efficient as in person meetings. Spending more time at home may or may not be a further win – it depends where you live and who else is living there - but certainly for my generation seems largely to have been popular.
I’m aware that, like my daughter, many of my children’s peers been working from their parents’ home but that is not sustainable for the obvious reason. It is also worth pointing out that the employer is getting services such as heating and broadband paid for by the employee or in this case their parent.
Perhaps the drawbacks of WFH are less obvious: chance conversations with colleagues, whether over the water cooler or a drink after work, are sometimes highly productive but will no longer happen; it is less easy for managers to keep an eye on colleagues who may be significantly stressed or who are under-performing; workers may find it more difficult to separate their home and their work lives and end up over-working; you can undoubtedly have too many, or too lengthy, webinars; not everyone, particularly the younger generation, has a home where they can work efficiently from; it is harder to mentor or train younger or starting employees, and also to build an office or company culture.
It seems to me that, taken together, these mean that WFH is not sustainable in the long term, even though the short term impact on office efficiency may be low. Most managers will have recognised that most employees can be trusted to work at home. Within financial services there will be some functions such as trading where the ability to transfer information by voice immediately is valuable, which will remain office-based. But the majority of workers will move to a more flexible environment using hot desks and coming in anything from one to five days a week.
That probably means arrangements more like serviced offices (or tech companies) with greater communal space. For industries such as asset management, used to open-space working, this will not be difficult but it will be interesting how more office-based professions, such as lawyers, cope with it. I am not convinced offices will be markedly smaller, because younger staff in particular may wish to come in on a daily basis for both social and other reasons, but they will be configured differently. Nor do I believe the location will change greatly, though there may at the margin be greater emphasis placed on transport convenience over size of floor space.
I’m also intrigued how companies can take on new employees under even partial WFH and integrate them into the team culture and start the process of training them. Quite apart from the formal training process, and even here we are told that all students learn roughly a third of what they learn from their fellow classmates, there is a clear need for sufficient senior staff to be on-site in order to provide advice and mentoring on what actually happens in the office.
Staff will still need to visit clients, albeit perhaps less frequently than pre-COVID-19, and clients may need to visit them. There will still be a need for meeting rooms but it is more open whether companies will need the facilities to entertain clients for lunch, for example. A balance will need to be struck between the desire to maximise the opportunity to build a relationship and the need to obey social distancing norms. What about other facilities, such as gyms, which larger companies until now have touted proudly when trying to attract new staff?
And if WFH becomes more normalised, will staff choose to work further away from major cities such as London? I write this from Cornwall where a property boom is apparently taking place as COVID evacuees enjoy the very real delights of the county in summer. However, I suspect most companies will want their staff to come in regularly, which means keeping travel times not too long. I rather doubt the four and a half hour (incidentally no shorter than 120 years ago) minimum journey time from Truro by rail will appeal in midwinter and particularly when storms cut the railway line as they frequently do.
This article is not particularly about whether the values of office real estate will hold up. My best guess is that they will hold up better than expected, partly because of the arguments for not WFH above, but also because even a lower yield, assuming rents come down, remains quite attractive to long term investors. There may be a modest reduction in demand for office space, but I suspect change will be less than some are predicting and that the future of the office won’t be very different from the past.
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