City limits

If a significant proportion of the UK's workforce continue to work from home, it will have a profound impact on our city centres.

Morgan Stanley's analysis for August found that 63% of UK office workers still had not returned to work. This is significantly behind the average of other European countries (where only 30% had not returned to work). With reports of sustained productivity whilst working from home, expensive and often problematic commutes and an `R' rate that continues to climb, it is unlikely that the proportion of UK workers returning to the office is likely to significantly increase any time soon.

Any increase in return to work is likely to be driven by younger workers, who are attracted most by the office's `pull' factors: collaborating, socialising and learning from colleagues; and suffer most from home working's `push' factors: lack of dedicated work space, facilities and outdoor space.

The impact of this behavioural change will lead to a significant change in spend potential and resulting turnover available for city centre businesses. For example, if 50% of London's white collar workforce only return two days in five, the impact on turnover could be a drop of £362m per annum; if 50% of workers never return at all, then turnover could drop by £600m.

The change in spending, and the potential shift in audience, presents both challenges and opportunities to operators, landlords and investors in three main areas:

1. Too much retail
Our city centres have largely been protected from the falls in retail sales experienced by the wider UK retail landscape, due to the volume and diversity of footfall they attract. Pragma's occupier sales recording system STAR shows city centre sales for both July and August were just 20% behind their 2019 equivalent, highlighting the degree to which strong, sustained footfall entices brands to deliver relevant and exciting retail offers, which in turn drives sales. But if this footfall is no longer guaranteed occupiers are likely to find high occupational costs prohibitive and look to find where the most relevant and cost-effective space is. With town centres and suburban centres often lacking scale and diversity, occupiers will increasingly resort to online platforms.

2. Not enough residential
Demand for residential space in the heart of our city centres has never been stronger: Manchester's city centre population is due to double by 2025, creating huge potential to better serve the needs of residents. With ground floor commercial lettings likely to be challenged, opportunities abound for immediate life improving ventures, such as the secure bike storage seen at Carnaby Street through to longer-term improvements in the physical landscape, such as the public park proposed for Mayfield, Manchester (seen above), the first public park created in Manchester in 90 years. Responsibility lies with developers and the public sector to get provision right; residents needs schools, doctors, dentists, child-care options to ensure communities thrive. A lack of ground floor space should not present a problem and intelligent provision of relevant services offers a key point of difference to attracts buyers.

3. Demand for jobs
Though more office workers will have the potential to work from home in the future, many occupations still require a physical presence and our city centres often provide the best enabled locations for them: proximity to workforce, transport, complementary businesses and services all ensure interest in locating in and on the periphery of city centres remains. If demand for office-based solutions recedes, there is potential for light-industrial to partly fill the gap, particularly if in partnership with residential development. Whilst not perceived as natural bedfellows, Pragma's sister company, Benoy, recently reported on the need to address the challenge presented in combining residential and light-industrial head-on and are well-placed to meet this challenge.

As a key driver in what makes our city centres relevant, the ability to create and sustain jobs across a range of industries is of paramount importance and only likely to increase in the future.

Andrew McVicker