The suburban shift

The effects of a country-wide lockdown, combined with a greater desire for a more satisfying work-life balance, have made us all a little more selective about where we want to spend our working days.

With new ways of working, a city-based job in the time of Covid-19 may potentially be less of a factor in home buying decision-making; however, full time working from home may not work for either the business or individual in the long term.

Facebook has been in the news recently eyeing offices in cities like Dallas, Atlanta, and Denver to act as hubs to support 50% of its workers who have decided to continue working remotely.

Could this hub and spoke approach, with corporate headquarters envisaged as smaller hosting spaces for clients, supported by a more localised multi-office strategy, be the future?

There's good reason for this approach, with research from CareerBuilder showing 56% of employees who described themselves as satisfied in their jobs citing work-life balance as a key factor, with short commuting times significantly increasing satisfaction.

Savills new Office FiT survey, which looks at the needs and wants of office-based workers before and after the Covid-19 lockdown, also showed that those with the shortest commute (under 30 minutes) are the ones most eager to get back to the office.

Savills Office FiT survey also shows the important role of the office in providing a sense of community and belonging. However, it also shows that most people want a mix of working from home and being in the office: just because people no longer need to go into 'the office' doesn’t mean that they won’t want to go into 'an office' at some point.

Ultimately, flexibility will be the new requirement for the office sector, with occupiers and their employees demanding comfortable, accessible spaces that can be easily adapted as required. This isn't anything new, but where these spaces are located and how they are designed is worth thinking about.

For those new escapees from urban centres, missing the office environment and their interactions with co-workers, a hub provides the perfect space to continue to connect and work collaboratively with colleagues and clients when required.

With an abundance of appealing regional, suburban and rural locations, combined with an increased demand by office workers to live outside of cities, the future of work could actually be brighter and more profitable.

Beyond attracting and retaining talent, which remains the biggest focus for any business, a decentralised hybrid office approach also offers businesses, landlords and developers exciting investment opportunities.

With an already significant demand for satellite co-working spaces, the Covid-19 crisis may accelerate this growth even more. A more balanced and regional focus may also assist with helping the UK economy bounce back, invigorating smaller towns and assisting in the creation of new local businesses. Work now has the ability to become even more local.

Despite economic disruption the longer-term rental growth outlook is robust

The property market fundamentals of the regional office market in 2020 are markedly different when compared to the last recession in 2009. This is most notable when analysing the supply market dynamics. Availability across the regional office market has fallen every year from 2009 to 2019, and current supply (11.3 million sq ft) is 44% below the peak in 2009 when 20.4 million sq ft was available. The supply constraints in the market are evident with Leeds and Glasgow having the lowest amount of Grade A space available in the last ten and five years, respectively. A combination of limited development activity and poor quality Grade B and C buildings being converted to alternative uses under permitted development rights has created the current low supply environment.

The overhang of available Grade B and C space in 2009 resulted in rental growth stagnating, whilst the longer-term outlook for rental growth in the current market is far more robust. Savills analysis has uncovered that average Grade A rents across the 'big six' regional cities since 2007 have not fallen when the vacancy rate is below 13%. The current vacancy rate is 7.5% across the 'big six' regional cities which is the lowest on record. Savills forecast vacancy rates across the 'big six' cities to remain below this 13% threshold from 2021–2023 after adopting conservative assumptions which reflect the immediate weaker economic environment. It is unlikely that the supply constraints across the market will be alleviated in the short term with the 61% of the development pipeline under construction across the 'big six' already pre-let or let under construction.

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_{Read the articles within Spotlight: UK Regional Office Market Report below.}