InsightsInsight - Commercial Property, Planning - POSTED: June 7 2021
The future workplace: predictions for changes in commercial property use
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It is always risky trying to predict the future. Three years ago, we might have been confident in our predictions about the future of the workplace, based on existing data and our experience to date.
But the COVID-19 pandemic changed things, impacting everything from the economy to how we work.
Commercial property, now and in the future
How has COVID-19 impacted commercial property use?
The past year has shown us that many office workers can carry out their work just as effectively at home, with lots of employees reporting a better work/ life balance, and employers seeing increased productivity.
Now that we appreciate the work is a thing that you do, rather than a place you have to go to, does this mean that the workplace has no future at all?
Our view is that this is unlikely. Human beings thrive on social interaction. We think that offices still have an important part to play in fostering corporate culture and employee relationships, supporting wellbeing and achieving social cohesion, and in helping to deliver a personal, and high standard of client experience.
What do occupiers want from the future workplace?
Commercial property occupies an unusual place in the economy. It is both a place to work (an occupier’s asset for tenants) and a place to invest capital (an investment asset for landlords and investors).
Historically the legal documents governing office space have reflected the interest of landlords and investors. 25-year leases, rent reviews that only go upwards, and strict interpretations of break clauses are a few examples.
As we shift to a more blended mix of working from home and from the office, the fall in demand for traditional space means landlords and investors will have to reflect the interests of occupiers more closely if they are to attract occupiers.
So, what do occupiers want from the future workplace? If we could sum it up in one word, it’s ‘flexibility’. Flexibility in legal documentation, in physical space, in location, and in the use to which we put new developments. For example:
- Term: A move away from the traditional long term ‘investment’ lease. Tenants will expect shorter terms, and more frequent and easier to operate break clauses so their use of space can become more flexible.
- Demise: Landlords should be prepared to grant smaller spaces which are open plan and more suited to collaboration and creativity.
- Change of use: Landlords and planning authorities will need to move away from prescriptive use classes to reflect the increase in conference centres and meeting spaces and to allow spaces to be used as offices and meeting rooms as the need arises.
- Alienation: The risk of unused office space could be reduced by giving tenants an increased ability to underlet premises, to meet the demand for smaller spaces and shorter time in the office.
- Surrenders of part: Alongside underletting, allowing tenants to surrender part of their office space would reduce unused office space.
- Insured risks: Pandemics should become an insured risk, ensuring tenants don’t have to pay rent should they not be able to use the property.
Making alterations to office space
Normally occupiers can make internal alterations as long as they have the landlord’s consent, and can install internal non-structural partitioning without consent.
There is still room for improvement here. There could, for example be no requirement for consent for any internal, non-structural alterations that tenants have to make to deal with infection control.
External or structural alterations are nearly always forbidden, but this could also be reviewed. For example, if tenants use non-structural partitioning to create safe office spaces, allowing them to make structural changes to create separate entrances for each space (and therefore meeting social distancing regulations) would maximize usable space.
What could workplaces look like in the longer term?
Looking forward, we might see a move towards a distributed business centre model. Instead of one central business hub, businesses could use smaller offices and meeting spaces located near groups of their employees’ homes. No employee would be more than a few miles from a business centre, and employers could use these on a short term ‘serviced office’ basis.
In the long term, workplaces might look different still. There is likely to be less desire to build vertically, and to try to fit as many people into a given space as possible. Instead, we may see a ‘flight to quality’ with buildings with high ceilings, open spaces and rooftop gardens.
So where does this new approach take us? The ‘doughnut city’ may well the future. Cities will be busy in the suburbs, but quieter in the centre. Business hubs could be scattered though suburbia whilst central districts could be emptied of offices and replaced by places for leisure and entertainment – park lands, theme parks, entertainment complexes or nature reserves.
Will our planning laws support this?
Planning and the future workplace
Current and future planning policy
Planning policy is currently set out in the government’s national planning policy framework and local plans. Reforms to the current system were set out in the ‘Planning for the future’ white paper, published in August 2020.
The broad proposal is to streamline the planning system with a ‘zoning system’, which groups land into three categories. Other proposals focus on the digitisation of the planning process, improving the delivery of infrastructure and making more land available for housing development.
The paper doesn’t deal with employment or the leisure uses as we have envisaged in our predictions for a ‘doughnut city.’ Whilst the paper was drafted in a COVID context, the focus has remained on housing delivery rather than dealing with the economy or how workplaces might change as a result of the pandemic.
Given the shorter-term impacts of COVID – more working from home and temporary closure of businesses – we can speculate on the longer-term impacts. For example, reduced demand for office accommodation and the predicted decline of the high street may result in transformation of town centres and re-purposing of buildings.
Planning permission and re-purposing buildings
S.57 of the Town and Country Planning Act 1990 says planning permission is required for any development of land. S.55 of the act says a development means “building, engineering, mining or other operations in, on, over or under land or the making of any material change in the use of any buildings or other land.” This will therefore apply for re-purposing the use of existing buildings.
However, if you own or operate premises and need to re-purpose them, two pieces of legislation may make life easier and potentially remove the need for planning permission.
Permitted development rights
The first piece of legislation, the General Permitted Development Order 2015, acts as a national grant of planning permission. If you are able to meet the conditions and limitations required, you are able to rely on the permitted development rights that the order allows.
There is still a prior approval procedure to complete if you are relying on permitted development rights to repurpose buildings for residential uses. These ensure a minimum housing standard is met and considers factors such as space, natural light and noise.
The second piece of legislation, the Use Classes Order 1987, clusters uses into classes. If your existing and new use fit within the same use class , you do not need planning permission in order to implement the change of use.
Changes in September 2020 were made to increase flexibility for owners of premises, by combining previously separate uses into a new a Class E. This class is very broad and includes shops, cafes, professional services, gyms, and light industrial use. It is estimated that 1.5 million buildings now fall within the scope of new use class E.
Whilst the prediction of the death of the hight street may be premature, we could see transformations of town centres to increase the mixed use of premises. Increased flexibility in planning will be key to determining how easy it is to achieve this.
For example, if we look at the current situation, with the introduction of the new class E use class it would be relatively straightforward to convert empty retail units to business hubs.
As we know, we can never be certain that our forecasts for the future will be correct – or that they won’t be impacted by something we could never have predicted!
However, what we do know is that flexibility, from both a landlord/occupier and planning perspective, will be key when planning for the future workplace.
For further guidance, visit a recording ‘The future workplace’ webinar.
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