Is hybrid working the future and what are the implications for property?

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A wide range of research has been conducted recently about the shift to hybrid working. A YouGov survey and CIPD research, indicate that after the pandemic many workers would like to continue to work from home at least some of the time.

On the one had this presents new opportunities for organisations to establish new ways of working, but what are the implications for property owners and the support infrastructure for city centres: coffee shops and restaurants, apparel stores and transport?

According to the CIPD research, some 40% of employers said they expect more than 50% of their workforce will regularly work from home after the pandemic has ended. This shows a dramatic shift from the pre-pandemic position when Office of National Statistics showed that only around 5% of the workforce worked mainly from home.

What is hybrid working?

Hybrid work has many variations: some companies may allow every employee the flexibility to work on-site and remotely part of the week, while others will insist on full-time on-site, or some combination of these two. A lot depends on the characteristics of the work and while some employees are lucky enough to be able to work remotely, for others that’s an impossibility.

Recent research by a US market intelligence company, Wakefield Research, found that almost half of employees (47%) would likely look for another job if their employer doesn’t adopt a flexible working model.

So clearly, post-pandemic, many employees see value in hybrid working. Although there are undoubtedly advantages in this type of working, many employees and employers see this as a perk, and the media often touts the part-remote, part-office schedule as the future of work, some employees say they have never been so tired.

One London office worker quoted by the BBC saw her company’s hybrid policy “initially came as a relief,” but as time went on the novelty of hybrid work soon gave way to hassle and a jarring one-day-in, one-day-out routine.”

From the employer’s point of view, the lack of synergistic contact within teams, security issues, the difficulties around monitoring and co-ordinating work flows and the difficulties when it comes to inducting and training new staff all detract from home working.

Organisations deciding to offer hybrid working will require a significant culture shift to establish new ways of working and the associated policies and practices. Lessons have been learned though the pandemic, but hybrid will undoubtedly make greater demands on managers and organisations. Time without the disruption of Covid may well see a drift back slowly toward mainly office based work?

Rethinking urban centres

Many planning experts are calling on central and local government to recognise that the purpose of city and town centres needs a major re-think. Some advocate a greater mix of uses with more emphasis on leisure activities and residential living, meaning many retail spaces would be repurposed. Others foresee more local work, with people tired of long commutes opting to work in a new generation of flexible offices based in their communities.

Andrew Almond, Partner at property consultants Pick Everard says that: “adaption is part of the picture moving forward”. This is unlikely to “fully address the void” left by businesses moving away from cities but, “I believe city centres need to become centres of excellence. We need to see cities specialising more in the areas that they are good at and the areas where they have assets that already support them.”

For urban centres that might mean supporting industries which require workers to be physically present, to create footfall. In smaller towns it might mean backing independent retail and other local businesses.

“The retreat of national retailers opens the opportunity for local businesses and I consider that to be a really good thing,” says Almond. “They’re a great source of vibrancy, variety and innovation, and they’re fantastic for local identity.”

The impact on property

During the peak of the lockdowns, commercial real estate companies went from fearing that their office buildings would be abandoned for good, to being optimistic about keeping most of their corporate tenants. However, the sector will need to go through important changes in order to stay relevant in a post-pandemic and environment friendly world.

The reality is that even if companies don’t leave their offices, they are very likely to demand reconfiguration and perhaps need less space in the future. Many are on leases which will take time to come to an end, so the crunch will come some time in the future for many property owners. In addition, legislation is likely to demand some major changes to office space for environmental reasons which would be better accomplished in vacant premises.

The changes brought about by the pandemic, changing working practices and the accelerated digitalisation of organisations, mean that landlords will have to adapt their premises to new ways of working.

Shared spaces and break-out spaces are likely to come to the fore with many employees coming in to their companies offices to brainstorm and socialise with colleagues as much as to do actual routine work. Tenants will want their buildings fit for future environmental standards as well as for any future pandemic, in particular with work spacing and more efficient air purifying systems.

Serviced offices

One sector likely to benefit the most from the shift in working patterns is with the serviced office providers

IWG.plc (Regus) the company that claims to be the world’s largest flexible workspace company, forecasts that hybrid working will continue to accelerate throughout 2022, bringing, “social, economic and health benefits to businesses and employees.”

IWG cites research by Global Workplace Analytic which claims to show that the adoption of hybrid working, and utilisation of flexible office space can significantly reduce a business’s cost base, saving on traditional fixed overhead costs including rent, heating, and support staff, adding up to an average of £8,100 per employee.

Financial savings for businesses aren’t only generated by reducing utilities needed within an office, says IWG Regus, they can also be created by changing the location of the offices themselves. Office buildings are typically concentrated in expensive city centres, which often means long commutes for staff.

IWG Founder and CEO Mark Dixon argues:

“The rapid global rise in the adoption of the hybrid-working model, where companies use technology to give their employees effective remote access and home working, in combination with easy-to-access local centres and traditional head-office sites, is here to stay. Not only do employees benefit from a dramatically improved work-life balance, but the model also represents a significant win for a company’s bottom line as well as employee bank balances. By switching to a hybrid model, businesses can expect to save an average of £8,100 per employee, all while minimising their carbon footprint.”

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Six compliance traps to avoid!

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If you’re a DIY landlord, don’t get caught out by upcoming changes to rental regulations. The experts at Belvoir advise…

1. Extension to smoke alarm regulations. Don’t ignore faulty smoke and carbon monoxide alarms! If landlords are informed that their smoke and carbon monoxide alarms are faulty, they are now legally required to repair or replace them.  Landlords must also ensure that a carbon monoxide alarm has been installed in any room where there is a fixed combustion appliance (including a gas boiler). In addition, when a new fixed combustion appliance is installed, landlords are legally required to install a carbon monoxide alarm. Although the implementation date for this is yet to be announced in England it has been enacted, so check those alarms!

• Levelling Up – On 2^nd February 2022 Michael Gove, Secretary of State for Levelling Up, Housing and Communities launched the long-awaited Levelling Up White Paper. This policy aims to shift focus and resources away from London and the South East and into some of Britain’s forgotten communities throughout the 2020s. The White Paper centres around 12 quantifiable missions, including a pledge for all homes within the PRS to meet a minimum standard – The Decent Homes Standard. Section 21 ‘no fault evictions’ would be abolished, and the Government is also consulting on the introduction of a Landlords’ Register to help crack down on rogue landlords. For more information, visit https://www.gov.uk/government/news/government-unveils-levelling-up-plan-that-will-transform-uk or talk to your local Belvoir agent who will be able to guide you through all of these upcoming changes as they unfold.

• The Leasehold Reform (Ground Rent) Act aims to help tackle inconsistency and ambiguity of ground rents for future leaseholders and is due to be implemented imminently. The Government is also aiming to protect owner occupiers and landlords of one property from bearing the brunt of the costs of correcting cladding issues, but this does leave portfolio landlords potentially exposed.  

• Fire Safety Act – The new Fire Safety Act 2021, designed to strengthen fire safety for multi-occupancy residential buildings is due to be implemented in the near future, this widens the definition of buildings that may need to address further fire safety requirements. The new legislation applies to:
• The building’s structure and external walls (including windows, balconies, cladding, insulation and fixings) and any common parts
• All doors between domestic premises and common parts such as flat entrance doors (or any other relevant door). For more information visit: https://www.gov.uk/government/publications/fire-safety-act-addendum/fire-safety-act-addendum

• Take care of admin! To stay on the right side of the law it is vital that landlords pay attention to detail. For example, ensure you serve terms and conditions within the tenant deposit scheme as well as the prescribed information, and obtain permission to serve the how to rent guide electronically before you do so, or it will not be considered served. Test smoke alarms ON the actual move in day, not when the inventory is done. These, and many other essential details, are all things that a reputable agent can do for you.

• Energy Performance Certificate (EPC) changes. Belvoir is currently awaiting confirmation of the next phase of the minimum stage of EPC requirements to move from the current level E to a level C on new lettings by 2025 and existing lettings by 2028. The changes aim to reduce energy bills for tenants and increase the quality, value, and desirability of a landlord’s assets.   

Wales

The long-awaited Renting Homes Wales Act is being implemented on 15th July 2022.  This is a major change in legislation for the PRS in Wales, changing the nature of tenancies from Assured Shorthold Tenancies to ‘occupation contracts’. The changes included a mandatory six-month notice period after a six-month minimum term for non-fault evictions, some succession rights, required terms and ability to change occupants when a joint occupation holder leaves without a new tenancy being completed. 

Scotland

Scotland has already implemented many changes to the rental market, however there is currently a consultation underway to move towards further tenants’ rights. A reputable agent will keep landlords up to date with all new developments.

Northern Ireland

The Private Tenancies Bill, which does not yet have an implementation date, contains several changes that will affect the PRS in Northern Ireland. The changes will impact notice periods, rent receipts, tenant deposits, rent increases, smoke alarms, energy efficiency and electrical safety regulations. Failure to implement the new rules will incur penalty breaches and fines. Belvoir will have all the amended processes in place to ensure that landlords remain compliant with the new laws, so make sure you have a chat with your local agent.

To find your local Belvoir office, visit belvoir.co.uk/offices

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Six compliance traps to avoid! | LandlordZONE.

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