Bringing social value into the offices of the future
Article by Chris Beales
As tenants and investors turn their focus to the S of ESG, social value initiatives will be the new normal in the office sector
The past 12 months have brought unprecedented disrupted to the office sector. As lockdown restrictions came into play many people were forced to switch from board to bedroom – in July 2020 the Office of National Statistics reported that 86% of all people working at home in April 2020 were doing so because of the pandemic. And as remote work became the norm, uptake of office space in the centre of the UK’s capital was at its lowest level since the post-Global Financial Crisis environment – JLL reported that just 941,000sqft of central London office space let during Q3 2020, the lowest quarterly total since Q1 2009.
Amid such disruption, questions are being raised around a sector that has long been a crucial part of many institutional portfolios. What will an ‘office of the future’ look like? And how will tenants interact with the office sector?
Tenant priorities are shifting
Remote work will become more intertwined with BAU. A survey from Global Workplace Analytics and Iometrics reported that more than three-quarters (77%) of respondents to an extensive global workplace survey wish to continue to work from home at least once weekly when the pandemic is over. This represents a 132% increase over those who did before Covid-19 struck.
Tenants will also place greater importance on social factors. Knight Frank’s 2021 London report highlighted that the top amenity targeted by global occupiers were facilities that support mental well-being. While PWC’s 2021 Prime Time for Private Markets report highlights growing demand for flexible offices with high ESG, health and well-being credentials, stating that while these sustainability trends are largely tenant-driven they could eventually be reinforced by regulation.
Capital looks to offices and ESG
Investors also put sustainability high on their priorities. CBRE’s EMEA Investor Intentions Survey 2021 report showed that, firstly, offices remain the most preferred asset type for Europe-based investors, and secondly, that 28% of European investors indicated they were considering or have plans to adopt ESG criteria in the near future, on top of roughly two-thirds of investors that already have an ESG policy in place.
Growth in tenant and investor interest in ESG and sustainability was well documented prior to the impact of the pandemic. But the events of the past 12 months have accelerated demand for and increased focus on ESG, and many fund managers are now concentrating on how to deliver the ‘S’ for both tenant and investor.
Social value in the office sector
Offices are well placed to deliver social value. The mix of stakeholders from property managers to suppliers to corporate tenants provides a range of entities that are likely already delivering social value. Property managers that are reducing CO2e emissions at a property, suppliers that employ locally, tenants that conduct school visits or offer mental health wellbeing services, are all generating social value. As discussed in our previous article, social value refers to the positive impact on society generated by a sustainable activity, which can often be reported as a pound value.
Partnering an ESG policy with a social value approach can provide tenants, fund managers and investors with a wealth of resource. Understanding what initiatives deliver social value, how to maximise social value delivery at a particular location, and creating reports, benchmarks and targets at a tenant or building level provides a complete approach to delivering value to society.
As the office sector looks to welcome back its tenants over the coming months, change will be evident. New priorities – and perhaps even new locations – will be on the agenda. And while we expect that the office will remain at the heart of corporate collaboration and culture, we also believe that a new focus on how a corporation’s home is delivering for society will be a key duty of an office of the future.