The term “new normal” is being used to describe the wide-ranging changes to society as a result of the COVID-19 pandemic.
No industry was spared in the virus’ initial economic destructiveness, as governments worldwide clambered to save jobs, industries, and their economic stability.
In the UK, numerous initiatives have been implemented over recent months to try and attract investment back within the country and, ultimately, stimulate a post-pandemic recovery.
Business leaders, however, have become acutely aware that the virus has fundamentally changed their industries for the long-term, and that new strategies are needed to properly engage with customers and clients in the post-COVID era.
In light of the fundamental shift in the way businesses are operating, the commercial property industry especially has been particularly hard-hit by the virus and lockdown rules.
One merely has to walk through central London right now to witness just how companies’ needs for commercial property have changed in the era of home working.
In addition, ongoing commercial property projects faced numerous setbacks delaying their completion; ranging from supply chain problems to cashflow issues.
Looking forward, the commercial property sector must adjust its priorities to properly cater for the new office needs of business in the “new normal”.
To identify what these needs are, and to provide some concrete examples of the necessary changes construction and commercial property financiers need to adopt, Accumulate Capital recently commissioned a survey of over 500 senior decision-makers within UK companies.
Our findings reveal a fundamental shift in priorities for businesses when approaching the commercial real estate market in 2020.
How have preferences changed?
The headline finding of Accumulate Capital’s research was that just under three quarters (73%) of senior decision-makers believe that COVID-19 will result in UK businesses downsizing to smaller office spaces en-masse.
As homeworking becomes the norm, companies now question the need for an office that can accommodate every single staff member at all times.
Interestingly, only 37% of those surveyed said they themselves were actively planning to relocate to a smaller commercial space themselves.
So, while current sentiment definitely points towards smaller offices becoming the norm, this shift may be more gradual than one may assume.
Half (50%) admit that their preferences regarding commercial working spaces have changed significantly as a direct result of COVID-19, thus impacting the size of the commercial workspaces they are seeking. Smaller offices, smaller rents, and more convenient locations are all seemingly increasing in attractiveness – as physical company meetings become rarer.
Indeed, 58% of those whom Accumulate Capital spoke to said that they felt working from home will become the norm within their company.
In summary, then, our research demonstrates that businesses no longer look at commercial property and offices in the same way.
It is hard to understate the implications of these shifting preferences for property developers and commercial landlords, and innovative thinking will be needed to properly meet the new type of demand for smaller, more agile commercial property that is evidently emerging.
That said, it must also be recognised that the business landscape is constantly changing.
While the picture of having all employees working in the office might seem hard to fathom right now, a return to this scene may only be several months away.
Continual research, therefore, is going to be vital to explore how this trend evolves.
The “new normal”
The question is how can the property sector respond to the demands of the “new normal”? Clearly, there will be challenges ahead and strategies will need to evolve, but there are also significant opportunities for those who can best adapt and deliver commercial spaces that meet the requirements of businesses in 2021 and beyond.
To that end, construction firms, property investors, and development financiers must all closely following the emerging trends in commercial property as a result of the virus.
Doing so will mean that they are better equipped to capitalise on the opportunities that present themselves during the “new normal”, while those who simply work based on hitherto successful strategies may find themselves out-of-touch with the evolving commercial property needs of UK businesses.
I, personally, am confident that property developers and construction firms will acknowledge that preferences towards commercial property have changed.
What’s more, demand for investment in bricks and mortar remains strong – property development finance firms that can show they are working on genuinely strong projects which remain relevant in our changed world stand to garner a great deal of interest.
Paul Howells is CEO of Accumulate Capital – an investment and property development finance firm. Accumulate Capital connects registered investors with developers in the property development finance sector to enable selected, high-yielding projects in the UK and overseas.