As businesses return, a new working style will shape how they use their offices. Leaders will consider both temporary and permanent solutions for their offices going forward. The lifting of the restrictions had great importance as we regained a sense of normalcy. Despite the apprehension, the job market and demand for offices have grown, creating a surge in office market activity.
2023 is anticipated to be a year of transformation, with firms evaluating new job approaches, like hybrid working, to gauge how people adjust to altered workflows. The office has endured the pandemic's turbulence and has been transformed in the process. Varying by sector, professional services have been the principal adopters of space in Scotland, constituting 25% of occupancy.
Expenses per seat are expected to rise due to upgraded services, features, and tech built into the area.
Additionally, collaboration space is predicted to increase from around 10% to anywhere between 25-45%, depending on the sq ft of the office building and how busy it is. Scotland's office market has changed significantly in the past year, and businesses are seeking the ideal space for their operations. We've assembled relevant market trends to illustrate the current state of the office market and the forces driving it.
Redefining the new role of office space
Companies have adopted flexible practices, though not everywhere. The pandemic shifted the workplace, creating a more dynamic atmosphere. Occupiers are exploring ways to better the office environment. Office design, size, usage, and location are determined by workplace norms. Companies need precise analytics from sensors and smart building tech for correct data.
Culture and leadership are driving decisions; workplace rules and strategies are tailored to company needs. To guide new strategies, businesses are collecting data on workspaces. This shift in space utilisation won't occur right away, but office design is heading towards this new standard with growing demand.
Companies seek to make the workplace more engaging, such as fostering community, fostering teamwork and recruiting/maintaining staff. Studies and polls propose that people (especially younger ones) may reject a job that doesn't have teleworking. This could have implications on hiring, effectiveness, and mental health, but the long-term effects are not yet known.
Companies are seeking more flexibility in their workspaces, and thus must assess their leases. Obtaining such flexibility is a challenge, though there are more options than ever. Short-term leases and 'plug and play' space, allowing for quick occupancy without long-term commitment, are becoming increasingly favoured.
Increasing quality of space
The Scottish market has the most space in 5 years, making prime and lower quality offices separate. New or renovated buildings will be the top choice for renters.
Providing CAT A+ and 'plug & play' space is growing, as landlords are aiming for reduced empty periods and offering rent-free incentives to keep tenants. In 2023, the serviced office market is prepared to take advantage of changes in work habits and workplace requirements, and providers are searching for space again.
Occupiers will likely seek newer, more effective buildings, resulting in a decreased interest for low-grade space and a widening of the market. Tenants are favoring 'better quality, less quantity' space, further stimulating activity for new and restored real estate. Developing a custom-made workspace is still seen as a huge advantage.
Tenants and occupiers need to consider long-term advantages of leasing good-quality space to meet their objectives, rather than just reducing initial space costs. Sustainability and wellbeing are anticipated to be especially valuable in comparison to saving money.
Tenants and landlords will invest in tech and sustainability to enhance space quality. Upgrading tech in spaces will enable hybrid working, while proprietors will pursue net-zero, embrace ESG policies, and support the built environment's net-zero target by 2030.
Investment activity
Lockdown caused a dramatic decrease in Scottish occupier and investment activity, resulting in the lowest ever recorded investment figures. With travel restrictions easing, the UK office investment market is predicted to rise by 20% YOY. Abundant Investment stock will likely bring activity to near 10-year average levels.
Q4 2022 saw UK (United Kingdom) investors with the highest activity, having acquired £1bn. Developments were a prominent focus, with well-known redevelopers particularly active. If inflation persists, investors will be wary of its detrimental impact on property returns.
2023 began with a certain amount of uncertainty for businesses and landlords, but as time passes, normal business operations will resume in the Capital. Companies are gradually coming back to their offices after two years and are still looking for answers without all the details. As more businesses have a chance to plan and execute their plans, market activity and investment will slowly revive.
The Outlook for the Scottish office market 2023
The Scottish city centre office market has experienced a significant transformation in the last few years, foretelling the activity for 2023. This has been mainly due to the need for flexibility from both employees and business owners. Working from home has become the norm, and companies are demanding shorter leases, break clauses and the option to expand or reduce space within existing agreements.
The office's place has been examined with the growth of flexibility, but it's believed it will stay a business necessity. It's expected people will go back to the office 2-3 days a week, impacting talent recruitment, training, and employee wellness.
Expectations for outcomes are changing, however patterns are emerging. Landlords are investing in sustainable buildings and technology to meet tenants' demands for quality office spaces to rent, not just flexibility. These factors are integral for tenants wanting to return to the workplace with confidence.
Market demand hints at a return to usual investment activity. Inflation is a slight concern, however landlords' property upgrades present a possible incentive for investors, likely leading to a gradual climb in investment once businesses execute workplace strategies.
Spaces Taylored offer free design and space planning as part of our office fit out service and offer an extremely diverse range of office furniture as well as a move management and workplace relocation service. Contact us today if there is anything you require our help with. Call us on 0843 122 9545 or drop us an email at info@spacestaylored.comto find out how we can transform your current working environment into an inspirational place that you’ll love to spend time in. Be proud of your office space with the help of Spaces Taylored.
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