Pandemic risk poses question over future of skyscrapers

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Property experts have predicted that demand for office space in skyscrapers in London’s financial district is set to fall significantly despite the loosening of the coronavirus lockdown.

The City and Canary Wharf could both experience major changes in demand as physical distancing rules curtail the use of lifts.

With only two people allowed in a lift, working on upper floors in buildings would become unviable, many consider.

On Tuesday, City minister John Glen said banks in the City would need less office space after Covid-19.

At an online event held by the New Financial thinktank, Glen said: “Some of the banks will reduce their physical footprint in terms of their square footage in the City.”

Quoted by the Guardian on Tuesday, property consultant Tony Lorenz, of real estate specialist Lorenz Consultancy, said the trends he was seeing were the “most dramatic” shift he had seen in 50 years working in the commercial property sector.

The consultancy’s work with banks and financial bodies had led him to conclude that even allowing for physical distancing measures, such as the separation of desks, firms now had 20% more office space than they required.

Companies were not just planning to reduce their office size, he told the Guardian, but were looking to move to buildings where they could better control the environment and ensure the wellbeing of their workforce.

In April the chief executive of Barclays, Jes Staley, foresaw the trend away from skyscrapers: “I think the notion of putting 7,000 people in a building may be a thing of the past, and we will find ways to operate with more distancing over a much longer period of time,” he said.

Staley added that his bank was re-evaluating how much office space it needed, because it was now being operated by employees on computers “from their kitchens“.

One possibility, he mooted, was to use retail branches as network hubs for investment bankers and call centre workers so that they could avoid long commutes and busy central offices.

About 70,000 of Barclays’ staff worldwide are working from home due to coronavirus lockdown measures.

Meanwhile, research by credit rating agency Moody’s Investor Service suggests that environmental, social and governance (ESG) factors were an increasing focus for investors, who were watching to see whether companies were best supporting employees and clients as the coronavirus pandemic hit economies globally.

Investors were increasingly asking about whether companies had helped employees with technology at home, whether they would continue a flexible work policy and whether they had been lenient with creditors.

“We are a long-term investor, so we won’t be selling shares of companies immediately even if they don’t meet our ESG expectations,” one senior executive at an investment firm said. “We will continue having dialogue with them and monitor how they will change over the next five to six years.”