Yahoo Finance London high-rise offices to suffer 'dramatic' dent in demand, say experts
Demand for office space in City skyscrapers will be diminished even after the coronavirus pandemic is over, with experts predicting a major shift in the commercial property market.
As large proportions of office workers continue to work from home and physical distancing rules mean people will be unable to cram into lifts to access higher-level floors, the City of London and Canary Wharf district are expected to be among areas with the biggest shift in demand.
The coronavirus lockdown has prompted some of the UK’s most prominent companies to announce large-scale job losses. The aviation, automotive and retail sectors have been among the worst hit, as businesses adjust to dramatically reduced revenue projections.
While the government’s job retention scheme has so far protected millions of jobs, fears are mounting that unemployment will rise as the scheme begins to be phased out from August.
Since lockdown began on 23 March, some of the UK’s largest companies have announced plans to cut a total of 60,000 jobs globally, many of which will fall in the UK.
Rolls-Royce - 9,000 jobs
The jet-engine manufacturer has confirmed that 3,000 job cuts, of a planned 9,000 worldwide, will be made in the UK. In May Rolls-Royce said it would make the first round of redundancies through a voluntary programme, with about 1,500 posts being lost at its headquarters in Derby, as well as 700 redundancies in Inchinnan, near Glasgow, another 200 at its Barnoldswick site in Lancashire, and 175 in Solihull, Warwickshire.
BP- 10,000 jobs
The oil company said in June it plans to make 10,000 people redundant worldwide, including an estimated 2,000 in the UK, by the end of the year. The BP chief executive, Bernard Looney, said that the majority of people affected would be those in office-based jobs, including at the most senior levels. BP said it would reduce the number of group leaders by a third, and protect the “frontline” of the company, in its operations.
Centrica- 5,000 jobs
The owner of British Gas announced in June that it intends to cut 5,000 jobs, mostly senior roles, and remove three layers of management, in a bid to simplify the structure of its business. The energy firm has a total workforce of 27,000, of whom 20,000 are in the UK.
Bentley- 1,000 jobs
The luxury carmaker intends to shrink its workforce by almost a quarter, slashing 1,000 roles through a voluntary redundancy scheme. The majority of Bentley’s 4,200 workers are based in Crewe in Cheshire.
Aston Martin Lagonda – 500 jobs
The Warwickshire-based luxury car manufacturer has announced 500 redundancies.
British Airways - 12,000 jobs
The UK flag carrier is holding consultations to make up to 12,000 of its staff redundant, a reduction of one in four jobs at the airline. BA intends to cut roles among its cabin crew, pilots and ground staff, while significantly reducing its operations at Gatwick airport.
Virgin Atlantic - 3,000-plus jobs
Richard Branson’s airline is to cut more than 3,000 jobs, more than a third of its workforce, and will shut its operations at Gatwick.
EasyJet – 4,500 jobs
The airline has announced plans to cut 4,500 employees, or 30% of its workforce.
Ryanair – 3,000 jobs
The Irish airline intends to slash 3,000 roles and reduce staff pay by up to a fifth.
Aer Lingus – 900 jobs
The Irish airline, part of International Airlines Group (IAG) plans to cut 900 jobs.
P&O Ferries – 1,100 jobs
The shipping firm intends to cut more than a quarter of its workforce, a loss of 1,100 jobs. The company, which operates passenger ferries between Dover and Calais, and across the Irish Sea, as well as Hull to Rotterdam and Zeebrugge, will initially offer employees voluntary redundancy.
JCB – 950 jobs
Digger maker JCB said in May up to 950 jobs are at risk after demand for its machines halved due to the coronavirus shutdown.
Ovo Energy – 2,600 jobs
Britain’s second biggest energy supplier announced in May it planned to cut 2,600 jobs and close offices after the lockdown saw more of its customer service move online.
Johnson Matthey – 2,500 jobs
The chemicals company said in June it is planning to make 2,500 redundancies worldwide over the next three years. The move will affect 17% of the workforce at the firm, which is a major supplier of material for catalytic converters.
Bombardier – 600 jobs
The Canadian plane maker will cut 600 jobs in Northern Ireland, as part of 2,500 redundancies announced in June.
The Restaurant Group – 1,500 jobs
The owner of Tex-Mex dining chain Chiquito, and other brands including Wagamama and Frankie & Benny’s, said in March that most branches of Chiquito and all 11 of its Food & Fuel pubs would not reopen after the lockdown, leading to the loss of 1,500 jobs.
Monsoon Accessorize – 345 jobs
The fashion brands were bought out of administration by their founder, Peter Simon, in June, in a deal which saw 35 stores close permanently and led to the loss of 545 jobs.
Clarks – 900 jobs
Clarks plans to cut 900 office jobs worldwide as part of a wider turnaround strategy
Oasis and Warehouse – 1,800 jobs
The fashion brands were bought out of administration by restructuring firm Hilco in April, in a deal which led to the permanently closure of all of their stores and the loss of more than 1,800 jobs.
Debenhams – 4,000 jobs
At least 4,000 jobs will be lost at Debenhams as a result of restructuring, following its collapse into administration in April, for the second time in a year.
Mulberry – 470 jobs
The luxury fashion and accessories brand said in June it is to cut 25% of its global workforce and has started a consultation with the 470 staff at risk.
Jaguar Land Rover – 1,100 jobs
The car firm is to cut 1,100 contract workers at manufacturing plants the UK, potentially affecting factories at Halewood on Merseyside and Solihull and Castle Bromwich in the West Midlands.
Travis Perkins – 2,500 jobs
The builders’ merchant is cutting 2,500 jobs in the UK, accounting for almost a 10th of its 30,000-strong workforce. The company, which is behind DIY retailer Wickes and Toolstation, said the job losses will affect staff in areas including distribution, administrative roles and sales. The move will also affect staff across 165 stores that are now earmarked for closure.
Property consultant Tony Lorenz said it was the “most dramatic” shift he had seen in his 50 years working in the commercial property sector.
His firm Lorenz Consultancy is working with more than 100 businesses in a range of sectors as they talk with landlords, and is currently acting for a number of banks. Even allowing for physical distancing measures, such as the separation of desks, Lorenz predicts these firms now have 20% more office space than they require.
Companies are not just planning to reduce their office size, according to Lorenz, but are looking to move to buildings where they can better control the environment and ensure the wellbeing of their workforce.
“We have had a lot of demand for self-contained buildings – demand for their own buildings, with their own security and their own people in it, so they don’t have to share lifts with people,” he said.
Speaking on Tuesday, the City minister, John Glen, said banks with headquarters in London’s financial district would need a smaller amount of office space after Covid-19.
“Some of the banks will reduce their physical footprint in terms of their square footage in the City,” Glen told an online event held by the New Financial thinktank.
Financial institutions were among the companies that completely changed their way of working and sent their colleagues home from city centre offices prior to the government lockdown, as the coronavirus spread throughout the UK in March.
The chief executive of Barclays has already predicted that there would not be a return to rush-hour journeys to large corporate headquarters, even once Covid-19 no longer poses a risk.
The vast majority of the bank’s 80,000 staff were able to work remotely during the pandemic, allowing the lender to function as normal.
“I think the notion of putting 7,000 people in a building may be a thing of the past, and we will find ways to operate with more distancing over a much longer period of time,” Jes Staley said in April.
Physical distancing will challenge companies as they work out how many staff will be allowed to work from the office on any given day.
Accessing offices in high-rise buildings will also be difficult, if a maximum of two people are allowed to travel together in a lift, and workers cannot be expected to climb dozen of flights of stairs just to get to their desks.
This view is echoed by research into officespace from the investors service at the credit ratings agency Moody’s, which said the shift to remote or home-working would be permanent for many employees.
Moody’s analysts predict a drop in demand for office space across most of Europe, especially in cities, which will push down the cost of rent.
“We expect many people will continue to work from home and tenants will want more flexible workspace. This will outweigh the demand for increased space requirements to accommodate social distancing,” Moody’s said, adding “demand for physical space in urban areas will probably decline, curbing rental growth”.
