Written by:

Chris Sutton
Director
Sutton Consulting

 

____________________________________________________________________________________________________________________________

In April, in my article entitled “Out of the Crisis, a Fresh Start” I spoke about the fact that the pandemic had given us a chance to rethink our mind set, challenge assumptions and reimagine how our economy should operate.

That if we grasped this opportunity there was every chance Cardiff Capital Region could emerge stronger, more competitive, more resilient, and better equipped to thrive in the years to come.

Five months on, the sheer scale of disruption to the economy is apparent but also the opportunity to look forward and adapt the business environment to reflect these changes.

Home working- acceleration and acceptance?

We have seen significant disruption in working patterns and it could be well into 2021 before we can say that we are back to any sort of normality.

Undoubtedly this experiment in enforced ‘working from home’ will change attitudes and mould new remote working practices for the future – BUT we still cannot be certain yet how it actually will play out. What is certain though is that it’s not going to be a ‘one size fits all’ solution. Yes, if it works for employees and employers then home working, or indeed flexible working, is likely to be accepted on a permanent basis. BUT the key test will be the long term impact upon productivity.

My own impression is that office workers and businesses in this lockdown have indeed coped well in terms of doing the work that is in front of them, but some are perhaps treading water in terms of creativity. How do we recreate the informal interactions that happen every day within offices and café society, both internally within businesses and with like minded organisations – to cross-sell, to mould data in order to extract value and, ultimately, to create new markets?

In addition, there are the considerations that need to be given to the greater challenges home working often poses for our younger workers or those at the start of their career. Remote working makes it more difficult to learn from others and junior staff often do not enjoy the same quality of accommodation to work from compared to senior home workers. The answer probably involves scenarios where there is greater balance between the two; greater flexibility, and choice for employees but not at the exclusion of office based working.

My discussions with senior leaders of major office occupiers indicate that  they are keen to see workers back in the office but that key blockers have been childcare provision coupled with lack of capacity and user confidence in public transport.  However, with schools reopening now and a gradual improvement in both user confidence and capacity of public transport, the next quarter should provide a clearer insight into the general direction of travel. Monitoring these trends is essential as they will have significant longer term wider implications on transport policy, energy etc.

Does this herald the end of the traditional office market?

Yes and No. For the private sector, I do NOT foresee a rapid dropping off in the GRADE A office market. However firms may shed floor space and the development pipeline, which has delivered over 1.5 million sq. ft. in Cardiff city centre in the last decade, will surely slow as developers and funders seek to adapt their product to a changing demand profile.

However, GRADE B office buildings in less sought-after locations will likely fall in value and could drag down the market as a whole. All three cities along the south Wales seaboard have been hit hard by the lockdown. This has had, and will continue to have, a consequential impact upon our retail, leisure and cultural sectors where we can expect a heavy toll in terms of business failures. Cardiff has a high proportion of leisure occupiers (38.7% of the high street source: LDC) so is vulnerable too, however we would hope that our capital city should be strong enough to weather this storm and be able to repurpose redundant floor space. Additionally it would not be unrealistic to think that we might well start to see the end of large central offices of public sector workers.

Fortune favours the bold

I believe it is our secondary cities and town centres that will be the most affected. So let’s make the current crisis an opportunity for local authorities, working with Welsh Government and our City and Growth Deals, to be empowered to compulsorily purchase and regenerate large blocks of our town centres to create a more attractive mix of residential, leisure and retail space. If fewer offices and shops are required, we need to be able to change building use more radically and quickly. Let’s consider the relaxation of planning restrictions and greater use of zoning and simplified planning, to help reshape our towns and cities in a way that is more responsive to modern needs.

The Westminster government has recently announced an overhaul of the Use Classes Order, which is central to the planning system. Wales has the opportunity to reflect on these changes and make variations which better reflect the specific needs of Wales.

Greater flexibility between use classes would allow businesses to bring vacant properties back into economic use quickly and cost effectively. Permitted Development Rights, subject to minimum standards, would allow the rapid redeployment of vacant town centre properties to residential or ‘easy in easy out’ enterprise space, so vital to growing our SME sector. Indeed, there are opportunities to create greater ‘whole government’ linkage with areas such as planning, business rates, infrastructure and regeneration all key areas for intervention.

Let’s consider a scrappage scheme for out of town retail parks. There has been significant consolidation in the DIY, carpet and furniture sectors so we don’t need as much out of town retail floor space. If we do nothing we will continue to see these parks occupied by  ‘pile them high’ retailers competing directly with our high street retailers. So let’s encourage redevelopment to residential, or possibly repurpose to central ‘hub and spoke’ urban logistics parks which combine logistics depots for home delivery and ‘click and collect’. This would give a much needed boost to the ‘urban logistics’ sector that has played such a central role within the current crisis, with little in the way of strategic support, and which is currently the key driver of industrial and logistics employment.

This is where boldness is called for. We need to seize the opportunity. Town centre prices are rock-bottom, let’s capitalise on that and start to make some real progress in maximise our collective opportunities to regenerate and “build back better”.