Scott Wright: Is the great Scottish office comeback finally on cards?

For many the change will be a welcome return to normality following the latest wave of Covid infections, which began with the emergence of the Omicron variant in late November. There are now cautious hopes that a new stage of “living with coronavirus” – one that does not involve huge upheaval to people’s daily lives – is within reach, which is surely good news for town and city centre economies.

The green light given to people to return to the office is naturally positive news for the thousands of businesses up and down the country which depend on a daily stream of footfall in town and city centres to sustain their livelihoods.

Such businesses have endured a living nightmare as Covid restrictions have turned urban centres into ghost towns for protracted periods since the pandemic struck in March 2020, and it is the sad reality that many have not made it through to the other side. The huge amounts of empty units that blight our town and city streets bear testament to this grim fact.

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“Our towns and cities need people to create a vibrant and stimulating experience and to give them purpose,” Gillian Stewart, chairman of the British Council for Offices in Scotland, told The Herald.

“The office sector has a large part to play in this by encouraging staff who are able to return to the office. This will help the cultural identity and connection for the organisation but will also create demand for supply chain, retail, hospitality, leisure and cultural services and facilities which will help regenerate the economy.”

Of course, we have been here before with coronavirus. But thanks to the efficacy of vaccines, and because Omicron has ultimately proved to be milder than its predecessors, there appears to be genuine hope that things will be different this time.

But just as it would be nice to think we could wake up one day and the Covid bad dream would be over, and that society would return to more or less the way it was before, the reality is that the recovery for towns and cities will be protracted and challenging.

Office workers, for one, are unlikely to be flocking back en masse to their places of work immediately, with a gradual return perhaps more likely.

While Covid rules meant the majority of us made enormous sacrifices in our personal lives in the last couple of years, some people have also enjoyed the flexibility and indeed the financial savings that working from home has helped them accumulate. Such savings will be welcomed all the more as the cost of living soars, with annual inflation expected to rise to around six per cent in spring.

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In these circumstances, some may be happy to return to the office, but only for part of their working week. In theory, that could put them on a collision course with employers which are perhaps more insistent on their staff returning full-time, although anecdotally it does appear that many companies will offer a “hybrid” approach – in the short term at least.

Ms Stewart said the BCO “believes hybrid and flexible working is here to stay for the majority of office workers”.

She said: “Many organisations operated an element of flexible working already and the concept has been around for at least 25 years, so the pandemic acted as a catalyst for change for many and enabled the levels of corporate trust which allowed staff to work from home. This had a positive effect on office culture for many.

“Not everyone can work from home, however, due to the nature of their job or personal circumstances.”

What seems certain now is that the death of the office, which was genuinely debated in some quarters in the early days of Covid, will not come to pass, even though there will inevitably be more twists and turns to come before we get to the end of the pandemic.

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“I think there is a lot of noise out there, on social media, in the press, and the extreme positions in the debate are probably not revelatory,” said Basil Demeroutis of developer FORE Partnership, which recently launched the Grade A Cadworks building in Glasgow. “A one-size-fits-all approach is not the solution, and the solution for each company will be specific to its own situation: size, company culture, industry, customers and suppliers.”

Figures issued by property agents such as CBRE in recent days have underlined the recovery the office market has made in Scotland’s big cities in the last year

In Edinburgh, CBRE found, the take-up of office space last year was nearly as high as it was in 2019, before the pandemic hit. The agent also reported a considerable bounce-back was seen in Glasgow, with sentiment seemingly strong for the year ahead in both cities.

One concern that is routinely flagged by agents, however, is the lack of new Grade A office space coming through in major Scottish cities.

The shortfall is evidenced by the strong demand that has been shown for space at the few speculative office developments that are emerging, such as 177 Bothwell Street in Glasgow, which has secured a high level of pre-lets.

While this shortage is putting upward pressure on rents, the level of demand is surely an encouraging sign for those wishing to see office life flourishing in Scotland once again.

According to Mr Demeroutis, the outlook for Scottish offices is “surprisingly positive”. He notes there has been a “chronic under-investment in forward-thinking buildings which has created a low vacancy rate in the kind of properties tenants are looking for, and at the same time this shortage has set up a very favourable environment for new investment by funds like us who understand the direction the market is heading.”

That direction is seeing developers and property owners responding to a variety of demands from tenants, from considerations around environmental sustainability and net-zero to promoting the well-being of employees, Ms Stewart said.

Mr Demeroutis ventures further, noting that “there is a broader re-focusing on “purpose”, the organisation’s meaningful and enduring reason to exist, and management teams are having to quickly adapt their thinking as employees seek to achieve a higher societal purpose in their work.”

He added: “This goes far beyond just adding a simple litany of green features.”

Looking to the longer term, it has certainly been encouraging in recent days to hear news of major investments being lined up for Glasgow, where Land Securities is planning to demolish the Buchanan Galleries shopping centre and replace it with a mixed-use “urban neighbourhood”.

Inherent to the proposals is the recognition that major cities can no longer rely on big shops to drive their economy. Indeed, it is increasingly clear that Scotland’s big towns and cities need to offer more reasons for people to visit, whether it be culture, hospitality, events or tourism, and more people to live within their centres to restore vibrancy.

In the shorter term, businesses will be embracing the return of office workers in the weeks ahead, and will be especially grateful if the hybrid approach becomes more of a full-time commitment in the not-too-distant future.