A lot has been written by the mainstream media about remote working during the lockdown period and over the last months, with many businesses now realising that the 'office' of the future will indeed (at least partly) be 'home-working'. For 'Big Business' with their expensive offices, this could be an opportunity to cut substantial costs at a time when it is most needed. I can therefore see some commercial tenants not renewing leases when they fall due for renewal, exercising break clauses or looking to sublet surplus office space rather than continuing in full occupation.
It has obviously taken the coronavirus for this change in attitude from 'Big Business'. In truth, it didn't have to. The technology for home-working has existed for many years - a telephone line, internet connection and access to a virtual private network (VPN). As we have witnessed during the pandemic, this technology is very easy to install.
On an equally positive note, there should also now be a more favourable view of home-working from regulators around the world, especially as financial services companies have demonstrated in this crisis their ability to provide a continued service to their customers despite lockdown.
Unfortunately, however, this is a good illustration of how the speed of business change has not always kept pace with technological developments. Of course, big changes are usually brought about by big events, and these, by their very nature, are infrequent. The last major world changing event I remember was the fall of the Berlin Wall and consequent collapse of the former Soviet Union. Ironically, a pandemic on the scale of what we have seen over the last 3 months was previously only considered to be what insurers famously call a '1 in 200 year event' - an event with the probability of occurrence once in 200 years. Well, we didn't have to wait 200 years for it to happen but this will now be a catalyst for change and innovation at different levels and across multiple industries.
'Virtual' offices are the obvious example because lockdown has forced us to focus on how we interact with each other for health reasons and because we have seen how businesses that switched to working from home have mostly weathered the economic storm. Admittedly, not all office businesses can adopt this model in the future, but those that can will probably do so if it makes economic sense for them, especially during a global recession when office space will likely be one of the largest business expenses.
What we are seeing is certainly business disruptive because in many areas of business all you really need is a computer/phone instead of the cost of a large office infrastructure. This will reduce the barrier to entry for new start-ups and should itself stimulate economic activity. It will also increase competition for 'Big Business' that have become too big to grow and too big to compete, compared with their smaller rivals that are still not too big to grow but big enough to compete (hope that makes sense but do think about the logic behind this).
In this 'new normal' I can also see private equity firms taking an increased investment interest in businesses that they consider have potential for significant cost savings. Private equity investors have made fortunes from buying businesses after identifying cost efficiencies (ie cost savings that are easy to implement but, for whatever reasons, didn't happen under previous ownership). In many instances, these inefficiencies have been largely labour related and they should now come to the fore in the new post-pandemic normality. I can therefore see a myriad of questions and opportunities, good on balance but potentially with some negative consequences as well. Here are but a few. Given the flexibility of home-working, will some businesses move to a 4 day working week? If people can juggle home with work life, will more people enter the workforce, and with no cost of travel for employees, will salaries readjust to reflect this new working reality? Will home working introduce the possibility for people to have more than one job and how will management keep 'home' teams motivated outside a real office environment?
Although only time will tell, I do think we are likely to see one of the biggest business revolutions in the last 20 years (if not more). Like in every competitive environment, there will obviously be winners and losers. It therefore makes sense for businesses to start planning now.
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