In today’s Scotsman (1 August 2022) Derek Nash shares his thoughts about how the commercial property market has adapted over the last couple of years.
It goes without saying that the world has changed for everyone over the last two-and-a-half years, since Covid-19 first emerged in China, then came to us all. The realm of commercial property is well down that list in terms of the attention it receives, however it is far more important than it might initially appear. Livelihoods depend on the habits of consumers and end users, whether they are grocery shoppers or office occupiers. Changes in these patterns can impact profitability or at worst, lead to business failure.
We know enough about those changes in habits, now, to be able to predict the direction of travel for commercial property in cities, towns and villages across Scotland, and it is fair to say that the changes are different than we thought they might be during the initial shock and the worst of the Covid lockdowns.
For example, there was a time, in 2020 and even into 2021, when we wondered whether large, city centre offices had much of a future and there was talk of ‘the death of the office’. Meetings were taking place using video software, workers had eliminated travel costs (which also had obvious environmental benefits) and working patterns for many had adapted to accommodate simultaneous domestic responsibilities. There was talk of large corporate organisations slashing their office requirements which they feared would sit largely empty.
In the main we have not seen the drastic shedding of office space which was predicted. From the work that we have done to help property owners and tenants navigate the pandemic, we can see that offices have been reconfigured and repurposed, with more shared and relaxed spaces, and, whilst recognising the sectors do differ, in most offices a hybrid arrangement is in place where many staff will work roughly half the week from the office and half from home.
But, for the most part, businesses in Scotland’s cities have kept their office space. In the vast bulk of cases, the driver for this is not managers seeking to work their staff harder and look over their shoulder in the office. It is actually the opposite - many organisations realised that staff welfare was suffering from the isolation of being home-based. Productivity was far less of a problem than personal well-being. This was most acutely observed with new recruits and those embarking on their careers.
So, that is larger offices. But not all commercial property is in large office blocks. In city centres, there are restaurants and cafes, shops and hotels, pubs and clubs, and they have been affected by varying degrees according to the profile of their customers, staffing issues and footfall.
Many businesses have suffered and in some cases the changes may be permanent. City centre cafes and sandwich shops, for instance, were heavily dependent on office workers. If there are no office workers, there are no sandwich lunches. If these shops are still open that may be largely due to furlough and other Government assistance. What does the future hold for such businesses? Will office workers be more inclined to meet up externally for coffees and lunches in the days they are working in the office?
For that type of business, the city centre’s loss may be the local high street’s gain. It is not unusual for a lawyer and a client to meet in a suburban coffee shop, amidst dogs and prams and other locals. This would have been rather inconceivable three years ago; not so now, where it saves people time and travel, conferring financial and environmental benefit.
The same appears to be true for shoppers. Local high street convenience stores were a critical part of national infrastructure during lockdown and they continue to thrive.
Nonetheless, while we know that city centre and suburban/high street commercial property have adapted and are holding up relatively well, that does not always reflect the experience of Scotland’s towns, where there is evidence of more empty units but this in turn may create other opportunities for innovation.
Of course, as we move deeper into macroeconomic troubles and the cost of living crisis, much can still change. For the moment, though, businesses, the buildings they use and the fortunes of the people who work in them have changed, but there is hope for a secure future for cities, towns and villages in Scotland.
