Open for business

The opening of the new Admiral Park Plaza shows there is demand for high quality new office space in the island. But the development was built at an uncertain time, with the effects of an unprecedented couple of years still somewhat unknown. We asked some of the most experienced property agents in the island to share their thoughts on the current commercial market and their predictions on what we might see happen in the future.

WE’RE HEARING THAT EMPLOYERS ARE PREFERRING PEOPLE TO BE BACK IN THE OFFICE WHERE THEY CAN BENEFIT FROM COLLABORATION, SHARING OF IDEAS, TRAINING AND MENTORING AS WELL AS GENERAL CAMARADERIE AND SOCIAL COHESION.

Since the start of the pandemic, it’s seemed like much of the world has shifted to working from home. While many Guernsey office workers did exactly that during the island’s two lockdowns, local property experts are fairly certain the island’s unique situation means the shift here will be nowhere near as marked as elsewhere.

Jo Watts is the managing director of Watts Property Consultants. She said while Covid has clearly had an impact on the market, it hasn’t substantially reduced the demand for office space: “While we have seen a couple of firms downsizing as a result of a long-term shift towards working from home, this has been the exception rather than the norm. Whilst tenants are looking at using space more efficiently, it hasn’t particularly led to additional space being released onto the market. It has more been a case of business ‘working smarter’. “Many businesses are offering their employees flexibility and choice, but overwhelmingly we’re hearing that employers are preferring people to be back in the office where they can benefit from collaboration, sharing of ideas, training and mentoring as well as general camaraderie and social cohesion.”

The managing director of D2 Real Estate in Guernsey, Alex Titheridge, agrees with her. He says the impact of working from home has been nowhere near as substantial as people may perceive: “The office remains central to the fortunes of the island’s economies. The impact has not been felt here as profoundly as other markets including the UK, for example. It’s worth noting that Guernsey-based occupiers don’t have the demands of a long commute on often overcrowded public transport systems so the office is often more appealing.”

That differentiation of Guernsey from the UK is an important one for Peter van de Velde at Rock Commercial as well: “Anecdotally, I believe that most people are back in the office here. The island is very much a different scenario to the UK. The commute costs and inconvenience don’t exist in the same way so people would often rather be in the office. I think the UK will certainly see a permanent move towards more split working, but that’s not what I expect for Guernsey.”

All three emphasise the importance of faceto-face interaction and co-working that is enabled by sharing office space. And it is in that area that they are expecting to see more significant changes in demand.

For Alex, it will mean a different approach from how office space has traditionally been used: “Occupiers are demanding more from their offices and looking to create a more agile working environment. The purpose of the office is being redefined to be more collaborative and inspiring. For example, investing in meeting rooms with high-tech conferencing systems that enable quality calls with remote employees, focus booths, collaboration zones, huddle pods etc. They will all become the norm, not the exception.”

That reflects what Jo and her team have been seeing as well: “We have noticed that those signing up to new leases are looking to create a more casual working culture, with breakout space, café areas and amenity zones to emulate more of the home environment. The drive is much more towards open plan accommodation with zoned areas for collaboration, workspace and amenity space. Rather than creating cellular offices, we are also seeing a shift towards firms adopting acoustic furniture and pods which enables space to be much more flexible and also reduces the burden on dilapidations.”

But that new way of working doesn’t necessarily fit with some of the island’s older office spaces. And according to Alex, there is no easy way of finding new high-quality stock: “There isn’t much availability of Grade A stock on Guernsey generally, it’s less than 2% of total stock. The natural constraints of the island and St Peter Port also don’t particularly help when it comes to new development, although hopefully we will soon see the next phase of office development at Admiral Park. Build costs have also shot up in the last few years as the cost of building materials as well as availability of labour has become prohibitive.”

Jo is also seeing that disparity between what companies are looking for, and what’s available to rent: “Businesses are definitely preferring good quality corporate space arranged over single floor plates. But with the limited amount of new build stock currently available, we are noticing a real mismatch in demand and supply, particularly for premises up to 2,000 sq ft and that over 8,000 sq ft. Building cost inflation is also a key factor in reasonably priced good quality space coming forward but we are working with several developers at the moment who are looking to reposition more secondary assets to provide contemporary Shoreditch style space which the market is demanding.”

While much of the focus is on the Grade A larger spaces – Peter says it’s worth remembering the importance of the smaller areas: “In Guernsey, between 80% and 90% of businesses employ less than five people and that is reflected in the requirements for offices and warehouses. The big spaces may make the headlines, but you need to remember that only 10-20% of the market is interested in those properties. I see a lot of demand from people looking for much smaller areas, and it is a strong part of the market.”

MAKING HEADLINES

While office take-up figures have been subdued over the course of the pandemic, there have been some notable transactions in the island in recent months, with more news potentially on the horizon for phase 2 of Admiral Park Plaza.

Bank Julius Baer – 23,000 sq ft at No 1 The Plaza (pre-let)

Grant Thornton – 23,000 sq ft at St James’ Place (pre-let)

Aztec – 15 years at Trafalgar Court (re-gear)