For many businesses, the shift to a hybrid remote work model happened literally overnight at the start of the first Coronavirus lockdown, while for others it has been a more gradual introduction over recent years. Regardless of how it was introduced, the hybrid work model is now the norm for many companies and seems set to stay.
A backlog of rent arrears and the new Commercial Rent (Coronavirus) Act are not the only effects of COVID-19 still impacting the commercial property sector. For commercial landlords, the rise of the hybrid office poses a significant threat to profitability. By definition, a hybrid workplace has fewer workers on-site, which reduces tenants' demand for office space.
As many parts of the economy return to approximate normality in the post-pandemic period, this is one trend that seems unlikely to fully reverse, leaving commercial property landlords facing potential tenancy disputes and a need to renegotiate lease contracts.
A hybrid work model typically comprises of some employees working on-site while others work from a remote location. That might be a home office, a desk in the bedroom or simply a laptop on the sofa.
The hybrid remote work model can also include public locations such as coffee shops, where employees can access Wi-Fi hotspots. However, for privacy and confidentiality reasons, this is often banned when recruiting into a hybrid office.
It's also worth noting that employees don't necessarily work entirely in the office, or entirely from a remote location. Since the COVID-19 lockdowns ended, some employers have offered a half-and-half approach, with staff coming into the office 2-3 days a week.
The result is a hybrid workplace with fewer people in an office at any one time and hence a reduced demand for physical premises. For commercial property landlords that can mean some tenants may be looking to renegotiate their leases upon expiry and reduce the size of their office footprint.
Hybrid offices are, for many businesses, a direct response to the Coronavirus pandemic. With large swathes of the population asked to work from home if possible, during the spring and summer of 2020, the hybrid remote work model was a necessity.
During the lockdown period itself, the typical hybrid workplace was heavily biased towards working from home, rather than a 50/50 split. As more offices were able to open with the easing of lockdown restrictions, the hybrid work model shifted towards the 'Goldilocks' middle ground of some employees spending some time at home, and some spending some time in the physical workplace.
In the immediate aftermath of the pandemic, demand for commercial office space dropped. Towards the end of 2021 there were indications of a return to demand for physical premises, but it seems likely that many companies will continue to take advantage of the cost-cutting nature of the hybrid model and some of the additional benefits that hybrid working can deliver.
For commercial landlords, adapting to the hybrid working revolution requires workplace transformation, to create flexible office space that provides a desirable hybrid work environment.
Hybrid office design is driven by connectivity, demanding a fully digital workplace transformation to allow remote employees to communicate seamlessly with those in the physical office.
To create this flexible workspace, landlords must ensure the technology is in place to support high-speed internet connections, high-definition video conferencing and real-time collaboration on large digital files.
Keeping the hybrid work environment in mind during future office fit-outs is a good first step towards creating the flexible office space companies will need going forwards.
This might feel like 'designing in' ways for your tenants to decrease the amount of space they lease, but the acceleration of digital workplace transformation since 2020 has shown that this is a trend you must work with, rather than resist.
By creating flexible office space, you cater to a wider range of businesses, including those that have fully embraced the hybrid work model. This can maximise your premises' appeal and potential lease revenues.
As with any significant investments or changes to your property, it's important to weigh up the risks and benefits, and make your own decision about exactly how to implement hybrid office design.
Some examples of the pros and cons of hybrid office space include:
The pandemic was proof that nobody can predict exactly what is around the corner, yet this is what commercial landlords are expected to do when forecasting the impact of any changes on their overall rental yields.
For expert advice on adapting your commercial properties and leases for hybrid working, contact our commercial property solicitors.
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