Returning to the office: what fintechs need to know
At time of writing, it seems likely that we’ll see the complete re-opening of the UK economy on 21 June, even if some social distancing remains. Given this, it’s no surprise that many fintechs are looking to return to the office, and make the most of in-person meetings, increased collaboration, and the psychological benefits of company culture.
But those looking to do so must navigate new challenges. The office rental market has seen growing demand for smaller office space from large companies who have adopted a hybrid model, and are thus downsizing.
Rents, thus far, have held up surprisingly well in the UK, and most fintechs, including start-ups, are making decisions about the size of space that they require, whilst landlords are offering “plug-and-play” space, and more flexible rental terms where they have negotiated more beneficial deals for tenants in comparison to the pre-COVID market. Fintech companies are the buzzword in the commercial property market, and have made a name for themselves as agile, progressive, and quick moving.
It’s time to make a play for shorter leases, updated quality office space, and an early move-in date, other more staid financial services companies seem to be holding back.
The below should help you understand how to make the market work for you:
What changes are we seeing in the office market?
Before the pandemic, few people could imagine a company culture without an office space. Now lots of companies have got used to the comforts and conveniences of home-working – and might be reluctant to move back to a full-time, all-in-office model. That means that lots of big companies are now looking to downsize, so they can hot-desk or offer flexible working. This downsizing effort is also reflected in demand for shorter contracts – with many of these firms refusing to commit to pre-pandemic standard five- to- ten year contracts.
Landlords, too, have changed their tack to keep up with the market. They are revamping their offices, at a time when tired spaces with limited amenities are simply unlikely to be rented. After all, companies looking to encourage workers back to their desks must provide a very different working environment to that which they left in March 2020.
But these aren’t necessarily the last changes we’ll see in the office market. We can expect to see further shifts come the end of June, when the government’s replacement for the commercial property moratorium comes into play. After a year where landlords were prevented from resorting to evictions, landlords may, once more, be able to remove non-paying tenants from their properties.
The UK government may extend time to pay arrears and even force landlords to give rent free periods. We expect that this much-anticipated moment will see more properties on the market as struggling businesses either go bust or decide to restructure via a company voluntary arrangement (CVA) or other form of corporate rescue arrangement.
What does this mean for your company?
For those fintechs brave enough to move first, there are great opportunities available. Among the early movers in the office market, we are seeing cut rents, shorter contracts, beneficial rent free periods, better equipped space – even within the smaller market.
But these kinds of deals will not last forever. Space is finite, and if, as is starting to be suggested, the vaccines can adequately protect against new variants of COVID-19, more and more companies will return to the office, shifting the market in favour of landlords, rather than tenants.
What can you do next?
If you decide it’s time to look for new office space, you need to work out your business needs and understand the exit of lease commitments, lining up your disposal of the previous property with the acquisition of the new one simultaneously. There is a market out there, especially for “plug and play” quality spaces. You may even be able to negotiate COVID-19 protection causes on new leases.
Careful planning and good advice will enable you to make the most of office opportunities – and set yourself up for the post-pandemic future we’re all looking forward to so much.