Demise of the office job
As millions work from home, Britain’s biggest landlord fears virus could trigger . . .
THE Covid-19 pandemic could trigger the decline of the traditional office as cash-strapped businesses slash the amount of building space they use, Britain’s biggest commercial landlord has warned.
As millions of white-collar staff work from home, Land Securities revealed just 10pc of the office space it owns is being used.
But it warned the change could become permanent after the lockdown ends, if employers seek to reduce costs.
It also said High Street retailers whose sales have shifted online may abandon or scale back their shops. The warning came as Landsec announced its annual losses widened from £123m to £837m in the year to March 31, after turmoil in the retail industry caused its properties to plunge in value by £1.2bn.
It fears there is worse to come as tenants forced to close their businesses during the outbreak struggle to pay rent.
The FTSE100 giant collected just 63pc of quarterly rents within ten days of their March due date as the pandemic hit, down from 94pc a year earlier.
Warning it does not expect the economy to fully recover until 2022, it cautioned that retail rents could plunge by three quarters in a ‘severe but plausible scenario’.
Yesterday Mark Allan, who took over as Landsec boss last month, said he was launching a review of the business and that ‘nothing was ruled in or ruled out’.
After the announcement, its shares tumbled 12.8pc, wiping £490m off its market value and taking the stock’s losses this year to 43.6pc.
Business leaders including Barclays boss Jes Staley and advertising guru Sir Martin Sorrell are examining whether they could reduce the amount of money they spend on office space.
This trend has been highlighted as a potential risk by Landsec, with the firm admitting that a surge in online shopping and video conferencing could lead to a ‘structural shift’.
It said retailers may soon require ‘less physical space’ and ‘as people become more comfortable and familiar with virtual interactions, the use of permanent office and physical meeting rooms may decline’.
Speaking to analysts yesterday,
Allan and other executives insisted that although the retail portfolio, which fell in value by 20pc during the year, was struggling, its office properties were ‘resilient’ and could adapt to changing demand.
He and London boss Colette O’Shea insisted there was ‘an ongoing need for offices’ and claimed firms may decide to keep the same premises with fewer workers in them,
They said some firms may choose to have a larger number of staff working from home but bring back cubicle offices for those who commute. This would give employees more personal space and make workplaces more hygienic while social-distancing rules remained in place.
O’Shea said: ‘We’ve obviously experienced a period when offices have been very densely occupied. With people coming back into work, they’re going to be looking for healthy buildings.
‘If we imagined a world where, at its extreme, we go back to cellular offices but then there’s a proportion of people working at home and probably a bit of flex mixed into that as well, then arguably, the space-take could be similar.’
She said Landsec’s buildings were ‘able to adapt’ to whatever the new demands would be.