Both offices and people are migrating: Where are they going?

The Greater London Authority (GLA) estimates that around one third of Londoners have been furloughed, lost their jobs or had their working hours reduced because of the crisis, though with predictably wide variation between industry sectors. The sectors that employ the highest share of London’s workers and in which the vast majority of businesses had continued to trade represent 32% of the city’s employees. Workers in these are sectors are least likely to have lost their jobs, and most likely to have been working from home.

Contrastingly, in the ‘accommodation and food service activities’ sector, which employs eight percent of working Londoners, only nineteen percent have continued to trade. Projected forwards, that could result in a 31% reduction in its size relative to 2019; 135,700 job losses, alongside 50,000 in manufacturing and construction and 90,000 in local government, education, health, arts and recreation.

The ‘office’ sectors, despite their inherent adaptability, will not be spared; they are projected to decline by 13%; 195,000 job losses. Commercial real estate in the capital faces the impact from almost 200,000 people in businesses based in offices losing their jobs, while those that remain will be working from home at the very least a third of the time, hammering London’s economy in direct proportion to its overreliance on office-based industries and the services that support them.

The commercial property sector is mostly bullish about effect of these trends on its business prospects, though it is not always easy to distinguish reasoned estimations of future demand from boosterism and PR. The property management platform Re-Leased reported that only around half of commercial rents for the third quarter had been paid by early July, a situation characterised by its CEO as “a sign of the capital’s resilience”.

“The incentives to downsize in London are exceptional; reducing the office footprint in the next most expensive European citiy, Paris, brings only half the savings”

It requires some mental gymnastics to see a business sector that is not even collecting fifty percent of its revenues as evidencing ‘resilience’. The estate agents Savills forecast that 7.2% of office space in the City of London will be empty next year, the highest level since 2008. In one possible harbinger of the future of the large city-centre corporate office, BP is selling its HQ on St James’s Square, a consequence of moving to what it calls “a more hybrid work style”.

The financial upside of reducing the office footprint was highlighted in a March 2020 survey of financial company leaders by the health & safety consultants Arinite. Even a small reduction in space of five per cent could produce financial savings of £150,000 a year for an average-sized SME based in central London, a huge amount of cash liberated for salaries, technology or R&D. The incentives to downsize in London are exceptional; reducing the office footprint in the next most expensive European citiy, Paris, brings only half the savings.

All this begs the question, what exactly is the office for? There is a broadly agreed shortlist of activities that work better in a shared environment, including training, induction, culture-building, socials, team working sessions, individual ‘pods’ for people who cannot or do not want to work from home and acoustically-protected spaces for virtual meetings and workshops.

“There has been a sharp refocusing on the city neighbourhood, most visibly and influentially in the concept of the 15-minute city”

Google CEO Sundar Pichai describes the repurposed office as a place for “on-sites”, flipping the corporate ritual of the off-site to one in which employees gather in a central workplace to escape the confines of their neighbourhood, families, housemates, inadequate home working spaces and the blurring of professional and personal time.

Alternatively, the office could come to them.

Government-mandated restrictions on movement and personally calibrated reluctance to travel have led, since March, to a sharp refocusing on the city neighbourhood, most visibly and influentially in the concept of the 15-minute city developed by Sorbonne professor Carlos Moreno and enthusiastically embraced by the recently reelected socialist mayor of Paris, Anne Hidalgo.

The fifteen-minute neighbourhood is one in which hyper-proximity to the essentials of urban life - housing, work, recreation, services, shops - are reachable within a quarter-hour’s walking or cycling. The idea shares similarities with Barcelona’s ‘superblocks’ or superilles, “mini neighbourhoods around which traffic will flow, and in which spaces will be repurposed to “fill our city with life”, five of which have been built since the first was established in 2016. Salvador Rueda, head of Barcelona’s Urban Ecology Agency, envisages 70% of the city’s street space eventually being car-free.

On his personal web site Paris’s Moreno acknowledges that “Work is more problematic because people’s jobs are often some way from their homes”, adding that “our approach to work is the same as it has been for the last 50 years. Is it always necessary to show up somewhere, to be physically present in front of the boss?”

One answer is to transfer downtown to the suburbs, as has happened in Homdel, New Jersey, where Eero Saarinen’s quarter mile long late-1950s Bell Labs building has been refurbished and repurposed into Bell Works. In an awkward neologism, the developers have christened it a “Metroburb. An urban hub. A little metropolis in suburbia…a large-scale mixed-use building, with great access, office, retail, entertainment, hospitality, residential, health, wellness, fitness, everything you would find in a metropolis but in a great suburban location.”

More prosaically, workspace providers such as WeWork and International Workplace Group (IWG) and their brands Regus and Spaces, are shifting their attention to suburban locations or ‘donuts’ around the central core. “It’s a pivot into the suburbs and the rings around London, Birmingham and Manchester,” Mark Dixon, IWG chief executive, told The Guardian.

This centrifugal movement outwards from urban centres has the potential to spark a new lease of life for shuttered retail premises and shopping malls

WeWork is reported to be slashing its commitments in Shoreditch and has abandoned its plans to lease the Hyphen in Manchester as they seek to exit 66 properties around the world and renegotiate leases on 150 other buildings, after burning through £1.7bn of cash since the beginning of the year.

Big businesses with sufficient scale and a legacy of suburban and smaller town premises, including Virgin Money, Metro Bank and Lloyds, are converting their branches into distributed workspace for staff who formerly commuted into central head offices. Deloitte has announced it will close its Liverpool office in favour of remote working and is downsizing its Manchester office into two floors of a WeWork space in the Hanover Building. This centrifugal movement outwards from urban centres has the potential to spark a new lease of life for shuttered retail premises and shopping malls.

In a similar move, Covene, a US developer of ‘flex’ (coworking) space, have taken the much-touted model of the future office as a hotel, and implemented it in substantial ex-retail spaces. Now active in the UK, they plan to buy up former department stores, offering flexible space and terms to businesses that see long leases as unviable. Unibail-Rodamco-Westfield, owners of the upmarket Westfield shopping centres, have secured planning permission to turn the House of Fraser on their west London site into flexible workspace.

As offices migrate away from downtown, the people who formerly worked in them are subject to a double movement. Some are being lured into the city by falling rents and the possibility of walking or cycling to their workplace when they do need to be physically present. Others are taking advantage of remote working by relocating to places where they can enjoy more congenial lifestyles, whilst being close to like-minded colleagues and contacts.

“Young people are drawn to cities for the combination of economic opportunity, thick labor markets, thick mating and friendship markets”

“Proximity to other people is the driver once again,” Yolande Barnes from The Bartlett Real Estate Institute at UCL observed in her talk at the Festival of Place on the future of real estate. In this stage of urban evolution Barnes calls the Digital City, being close to “materials, markets or finance” no longer determines where people need to live. Physical proximity to other people, though, “is the one thing you can’t get on a screen.”

However, Barnes is adamant that this cannot be interpreted as another wave of what has previously been characterized as suburbanization: “Very often what [people] are fleeing to are alternative smaller neighbourhoods, towns and alternative cities”, in other words, they are still living in urban centres. “Where people do remain in a large city, they’re much more attached to a particular neighbourhood,” Barnes adds, describing this trend as “a new localism”.

The result of this “urban dispersal”, though, are far from neutral from a socio-economic perspective. This summer, the London Assembly Housing Committee surveyed Londoners’ housing situations and attitudes in response to the pandemic, publishing the results in late August. A third wanted to move home, half of those to somewhere out of the city. The Chair of the Housing Committee, Murad Qureshi commented “if this exodus from London materializes, this could have a huge impact on the city, the economy and the housing market.”

Projections that the capital’s population will continue growing, to over 10 million by 2036, look as if they contradict short-term demographics. But that growth has been uneven for decades, with outer boroughs expanding faster than inner ones, whilst becoming poorer.

There are mixed signs and opinions as to whether an outward shift of work, and the spaces in which it happens, could change this. Some economic and urban geographers predict the continued centripetal movement of young educated workers into inner city neighbourhoods, labelling the trend ‘youthification’.

In their paper Cities in a Post-COVID World, a trio of leading urban-focused academics - Richard Florida, Andrés Rodríguez-Pose & Michael Storper - state that “Young people are drawn to cities for the combination of economic opportunity, thick labor markets, thick mating and friendship markets, and related amenities they provide. They are likely to continue to come to cities.”

At the time of writing, the rent being asked for a 2-3-bedroom Kings Cross flat has been slashed by 39% to £1,300 a month, another in London Bridge, is down 38%, one in Pimlico by 33%

Despite ‘thick mating markets’ and other attractors, city rents tell a different story. Zoopla’s Rental Market Report shows a drop in rents in Edinburgh, Manchester, Birmingham, Reading, Coventry and Aberdeen. In central London, rents are plummeting in precisely those areas where young professionals might want to live.

For reasons best known to himself, journalist and translator Daniel Farey-Jones posts a continuous stream of screenshots from the Rightmove property portal to his Twitter account, tracking discounted rents for central London apartments. At the time of writing, the rent being asked for a 2-3-bedroom Kings Cross flat has been slashed by 39% to £1,300 a month, another in London Bridge, is down 38%, one in Pimlico by 33%. The more central the accommodation, the higher the discounts, a trend exacerbated by a ‘freefall’ in Airbnb bookings. Despite this, some young adults apparently prefer to keep working from home in the outer zones, maybe saving their rent to eventually buy a property beyond the M25.

The City of London Corporation, the municipal governing body for the ‘Square Mile’ of the capital’s financial district, seems well aware of a potential hollowing-out of the city’s downtown, launching an unprecedented five-year plan to ‘reinvent itself’ by attracting artists and small businesses to replace the people and capital leaving the City. In the brief summer interregnum when British workers were being urged back into the office, some City bosses expressed exasperation at their star traders’ refusal to return to the office “from their homes in Surrey or the South of France”, lending weight to the Corporation’s fears.

The launch of the City’s new plan came just a week after the governor of the Bank of France revealed that UK assets of £150bn (out of an estimated total of £1.2 trillion that will leave the capital) were moving to our European neighbour ahead of the completion of the Brexit transition period. In the same week, the House of Lords issued a report warning of a “catastrophic” threat to Britain’s £225bn professional services industry from leaving the EU.

While present-day London does share some of the factors that drove the urban exodus from US cities like Detroit, such as over reliance on a single industry, capital flight, a failure to repurpose downtown buildings such as unsold luxury flats and the ‘squeezing out’ of its middle classes, the parallels stop there. Although some white-collar workers are relocating further afield, many are moving outward within the city. What seems more plausible than an urban exodus is a profoundly ironic ‘Europeanisation’ of downtown London, a combination of the kind of ‘reverse gentrification’ planned for the City, with falling rents and a significant reduction in demand for office space opening up the possibility of mixed-use central neighbourhoods where people are able to live, work, make art and enjoy leisure, the way they can in central districts within Berlin, Vienna or Barcelona.

The social composition of London may be fundamentally altered, with more middle-class families moving to re-energised suburbs and peripheral neighbourhoods, working in a hybrid style between home, local ‘hubs’ and sporadic visits to the central office. Younger singles and couples, along with well-off retirees, may migrate in the opposite direction, into revitalised city centre areas. There, apartment buildings rub shoulders with downsized and repurposed offices, smaller businesses and the new generation of clean, quiet urban industries, collectively creating demand for innovative building typologies like ‘The New London Mix’ proposed in Places That Work, a report by 00 Architects, Dan Hill and GVA.

The FT doesn’t mince its words: “the new poor will leave big cities. This is the exodus that could reshape urban life in the coming years.”

Such developments, long speculated upon by urbanists, might have recently become more likely, but they run the risk of replicating or even exacerbating the city’s pattern of polarised inequality, primarily because of the grievous and unsolved issue of housing supply. Families moving outwards will tend to be those in which the adults are more able to work remotely, leveraging their relatively higher income to get more outdoor and domestic space - including, perhaps, a home office - in more desirable suburbs and raising house prices in the process.

In a city with an inadequate supply of genuinely affordable housing, this will have the effect of concentrating lower paid workers into already ‘left behind’ suburbs or pushing them out beyond the city, lengthening commutes, increasing health risks and eating into already scarce non-work time. The FT doesn’t mince its words: “the new poor will leave big cities. This is the exodus that could reshape urban life in the coming years.”

Traditionally, European elites fled the city when plagues struck. 2020 has been no different, most pointedly when a clutch of UK business tycoons and media figures lectured British workers on their duty to return to the workplace, Zooming in from overseas vacation properties or, in one particularly egregious example, from their yacht off the coast of Sardinia. Parisian novelist Leïla Slimani was widely criticised for publishing a gushing account of a lockdown idyll in her second home in the French countryside. Former Spanish Prime Minister José María Aznar escaped contagion-ridden Madrid to hole up in his Marbella villa. Then, as now, those with means avoided the city until the immediate danger had subsided.

In a city with an inadequate supply of genuinely affordable housing, this will have the effect of concentrating lower paid workers into already ‘left behind’ suburbs or pushing them out beyond the city

Pandemic-induced migrations are turning out to be more complex, more nuanced. The poor leave, the middle classes move to leafy suburbs and central neighbourhoods are filled with young adults, artists, entrepreneurs and sprightly boomers. That constitutes a different city, but is it different in ways that really matter?

Reshuffling urban demographics without a radical transformation of housing, from an asset class to a Vienna-like commitment to “housing as a basic human right”, will do little to stem ever-rising levels of urban poverty in England, Wales and Scotland. Berlin began a five-year rent freeze last summer; Barcelona’s mayor is a former housing activist who recently gave property groups owning 200 empty city centre flats a month’s notice to either let them to tenants or forfeit them to the city for half their market value; in Vienna, the sixty per cent of residents who live in social housing have their rents capped at no more than 25% of their household income.

The alarming increase in levels of child poverty in Birmingham, Middlesborough and Newcastle-upon-Tyne are attributed to rising housing costs, according to analysis by Loughborough University’s Centre for Research in Social Policy. The analysis also showed the highest rates of child poverty – affecting 1 in 2 children - are in the London boroughs of Tower Hamlets and Newham, Olympic legacy locations which have seen record growth in house prices.

Downtown, if we do get to enjoy a future of car-free streets, outdoor cafes and restaurants, gently invigorating walks to our part-time workplaces and weekend family bike rides, that comfortable post-pandemic urban lifestyle will likely come at the expense of many others who have an equal right to the city.