Covid-19 coronavirus: what future for offices, now we've worked from home?

View from level 36, new PwC Tower, Commercial Bay. Photo / Michael Craig

A virtual public meeting at his Grey Lynn residence during lockdown was one of father-of-two Aaron Hockly's more challenging work-from-home moments.

"It was from a garage with unstable internet and a two-year-old and a four-year-old yelling outside - not ideal", admits the property boss of some of the issues many of us have had to overcome as we turned our backs on offices.

Adapting to the home base created some tense moments for the Vital Healthcare Property Trust fund manager who heads the NZX-listed business with $240m of property development projects on.

So what does the future hold for offices, now people like Hockly and the rest of us have worked from home for so long?

Economist Tony Alexander surveyed a group of 28 people this week and found an appetite to remain working from home. They cited seven major benefits:

• Reduced commuting time, stress and expense;
• Reduced pollution and contribution to climate change;
• Reduced need for investment in the roading network;
• Improved family life, seeing children off to school and during daylight hours on winter evenings;
• Lower after-school childcare costs;
• Better communication with people not habitually in centralised workplaces;
• Better business for neighbourhood cafes.

Worker expectation and employer acceptance of more work-from-home could be far more common once normality returns. The consequences for the multi-billion dollar commercial property sector could be major, Alexander forecast.

"This trend is widely expected to lead to reduced demand for office space in city centres.

"This will place downward pressure on the rents able to be charged by CBD building owners and that will reduce the valuations for such buildings," he predicted.

Few new office buildings were likely to be built in CBDs around the world, he says.

"That reduction in construction will free up some valuable construction resources for other activities," he says, which could mean governments could start large-scale residential schemes.

What fate the office once more of us work from home? Photo / Michael Craig

"But it is not just CBD office demand which will likely decline. Businesses are creating new online retail offerings and that is likely to lead to reduced demand for retail space. This is something which may not be all that visible in prime shopping locations and in the main cities. But it will worsen already challenging retailing precinct appearances in regional locations," Alexander says.

More warehouses might be needed as companies move back from just-in-time inventory management systems.

Not everything or everybody will come out of the Covid-19 pandemic threat worse off.

Shane Solly of Harbour Asset Management is not so sure we'll all devolve to home work.

"Business is about culture. We will see increased flexibility including more working from home but businesses will still need to come together in a controlled environment to build culture," says Solly. Offices will always be needed to act as the base for white collar employment.

But workplace casualisation has been occurring as employers seek to keep millennial employees, blurring of lines between home and work. So prime CBD offices which offer this type of flexibility will be a key, Solly says. Older buildings might suffer.

Philanthropist and office and apartment investor/developer Ted Manson of the Ted Manson Foundation and Mansons TCLM doubts C-grade office buildings would be converted into apartments.

"With the uncertainty of residential prices coming back, developers won't take these risks for a good while. Developers would also have to buy the C-grade buildings very cheaply to have a chance of making this work. And the banks will be risk-averse during the next few years so will be very cautious who they loan money to," Manson said.

More people will work from home but landlords would also renew leases as fast as they can if the tenant is strong.

Manson said that after the 1987 sharemarket crash, he bought buildings from distressed owners and banks to convert to residential.

"It's not much more expensive to build a brand new apartment building than convert an old building to residential," Manson said.

Son Culum Manson acknowledges the trend for more people to work from home. Mansons TCLM has, on average, developed one major new office block a year for the last 20 years, moving thousands of tenants to new fit-for-purpose architecturally-designed green star-rated premises.

"The trend of more remote working is already occurring in new office environments with flexible working and hot desking," Manson said.

None of this will change office demand though, he says.

"People need to be physically connected so will still be coming in to an office. In fact, I see an even bigger demand for new clean and green office environments as a result of this health scare, especially if a tenant with efficiency can get into a new six green star office building at a lower price than a B or C grade building. It makes sense to upgrade more so now than ever. If it makes sense economically for a tenant plus enables people to work in healthier environments why wouldn't you do it?," Manson asked.

Vital Healthcare's Hockly says consultants working in a range of fields, real estate agents and lawyers have been working remotely for years and that would continue and spread to other occupations.

But the enormous benefits of a physical office remain, Hockly said.

"People may have enjoyed working from home for a while, but I expect most now want to be back with colleagues, sitting at ergonomic workstations, meeting people face-to-face, enjoying the amenity a CBD provides and getting back some separation between work and home life," Hockly reckons.

Aaron Hockly of Vital Health Properties looks forward to returning to his offices. Photo / supplied

Some tenants might delay signing leases and consider reducing leased space "but they should also be thinking about the additional costs. Will employees get reimbursed for internet, electricity and other costs if working from home?

"What about office furniture? Will employees be as loyal if switching jobs involves little more than changing an email address? Where do you meet clients, colleagues and advisers? Will ACC premiums have to rise if working from home in likely less safe environments result in increased injuries?" Hockly asked.

Phone and video calls were poor substitutes for face-to-face meetings, particularly for more than two participants, he said - despite Zoom's appeal.

"Part of the reason why CBDs work for commercial or white collar workers is because they bring people who need to work together or meet in one area: colleagues, clients, advisers, service providers, bankers, shareholders, industry groups, government, training organisations etc," Hockly said.

Public transport systems were designed to support that, prioritising routes from homes to the CBD. Current and proposed public transport projects in Auckland and Wellington would only enhance the attractiveness of offices to employers and employees, Hockly believes.

Mark Lister of Craigs Investments Partners. Photo / John Borren

Mark Lister of Craigs Investment Partners says declining demand for commercial office space was a distinct possibility.

"Many businesses, both here and internationally, will have had a positive remote working experience, and to some degree, that approach could stick. I think there will certainly be a trend toward some employees working remotely, even for part of the time," Lister said.

That could be a win-win situation for employees and employers, he predicted. It can improve employee work-life balance. Businesses might have happier staff and lower rent bills.

"This trend could be a negative for some commercial landlords, although there will always be demand for good quality office space. We have always favoured industrial property, relative to office and retail, and that preference is now even stronger given recent events and the likely changes to how businesses operate coming out of this," Lister said.

Daniel Kelleher, a Buddle Findlay partner, warned that although many of us would be based at home for at least five weeks during the alert level 4 lockdown, that home was now technically our legal workplace, and that imposed certain responsibilities on whoever was paying us.

Whether people had adequate technology, desks and chairs, where in the house they had to work from and how appropriate that was, catering for offspring now that schools had shut, sometimes the need to care for older family members - these were all issues to be considered, he said.

Some older office staff with larger homes had studies or other areas they could retreat to, but younger staffers were sometimes working from dining tables, which could prove difficult in the longer term, he said.

Many tenants no longer had access to premises and many staff were home-based, he said, but employers who had sent workers home to work should remember that "they continue to have obligations to their employees as their home will be their workplace".

Employers had a duty to eliminate risks to health and safety so far as was reasonably practicable and to ensure employees were not put at risk while carrying out work, Kelleher warned.

Vic Crone says we're now far more tech-savvy. Photo / Jason Oxenham

Vic Crone, Callaghan Innovation's chief executive, predicts more people will work from home "now we've been forced to en masse. It's been relatively effective and so many have learnt how to use video conferencing. Is there any more real need to go into the office every day?"

She worked from the office and home over an approximately five-year period at Xero and says broadband's capacity has enabled the new work-from-home corporate New Zealand landscape.

Crone predicts potentially hundreds of thousands of New Zealanders might work from home at least part of every week after our alert levels finish: "It takes the pressure off the roading systems. There's lower emissions and less travel and its good for family life with better routines."

Many of the Callaghan Innovation's approximately 450 staff might work from home one to three days a week, having been incredibly productive during the almost five weeks of lockdown, she says. But it all depends on what they do and if their roles allow such flexibility.