Last month’s commercial property bulletin focused on retail and the potential shape of the High Street of the future, discussing the way in which the Covid-19 pandemic has necessitated a more flexible approach to real estate usage by landlords, tenants and local authorities. Since our last update, Haywards Heath, a town with a population of approximately 35,000, where Parfitts has two offices operating under its Colemans Solicitors brand, has seen a planning application approved for the demolition of a long-established office block to be replaced by a mixed commercial and residential development. It therefore seems like an appropriate time to take a look at another aspect of commercial property: office space.
Last Thursday, 29 October 2020, marked the closure of the Government’s consultation on proposals for reform of the planning system in England, set out in its White Paper: “Planning for the Future”. The focus of “Planning for the Future” is principally residential development: the word “commercial” appears twice in the White Paper whereas there are over 100 instances of “community” or “communities”. Nevertheless, when it does comment on commercial property, the Government continues to emphasise the need for greater flexibility, despite advocating a move away from the current, relatively discretionary, planning regime towards a more rules-based approach. In relation to commercial real estate, “Planning for the Future” emphasises the need for a new planning system to:
“help businesses to expand with readier access to the commercial space they need in the places they want and supporting a more physically flexible labour market”.
The reference to a more flexible labour market is interesting in the context of the marked shift towards home working that the Covid-19 pandemic has caused. Things may not be changing as fast as some commentators suggest and there will continue to be a need for more traditional office accommodation, particularly while smaller professional businesses are either unwilling or unable to support employees in adopting more agile working practices. However, earlier this month the multi-national professional services company, Deloitte, announced that it was closing offices across four locations, including Gatwick and Southampton, with 500 employees being offered full-time remote working. Earlier in the pandemic, it was reported that up to three quarters of Britain's biggest employers are looking at a permanent shift to flexible working. Banks and the financial services sector look to have been quick to embrace this shift.
Against this background, the recent planning decision in Haywards Heath that sees a dedicated office building (that had, in the past, been occupied by Lloyds Bank) being demolished and replaced by a mixture of housing and office space seems a sign of things to come.
As well as highlighting the need for flexibility when it comes to commercial space to accommodate a more agile workforce, “Planning for the Future” specifically references the UK’s knowledge-based economy, stating that in the future Local Plans will need to identify:
“… land needed to take advantage of local opportunities for economic growth, such as commercial space for spin-out companies near to university research and development facilities, or other high productivity businesses.”
Research and Development is an area of particular importance to the South East: the region boasts 21 universities and 36 business incubators and accelerators. The UK Government is looking to the country’s digital and technological businesses to help drive post-Brexit economic growth so it will be intriguing to see whether the spaces created by white-collar workers logging on from home will be filled by more creative scientific or tech start-ups, where collaborative working is better facilitated by working together and being in close proximity to universities or other R&D facilities.
Given that the “spin-out companies” cited in “Planning for the Future” will likely be start-ups with little or no trading history, will commercial landlords be willing to take their chances in letting space? What steps would a prudent landlord take to protect his or her position in these circumstances? How will commercial tenants make best use of available office space? How will both parties seek to maximise the benefits of the increased flexibility available to them? Businesspeople and their professional advisers will have to wrestle with these questions throughout 2021 and the years to come but, as we concluded in our last bulletin: creativity, agility and flexibility will surely be key to navigating the ‘new normal’.
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