CBRE says north-east firms need nicer offices for fewer workers

People continuing to work from home around the UK will likely mean a “constrained” office market in 2023, according to a new report from CBRE.

The global property giant has also highlighted the likelihood of a flight to quality as firms battle for any available space in the plushest Grade A accommodation.

Derren McRae, head of office for CBRE in Aberdeen, said: “Hybrid working is certainly influencing real estate decisions.

“But there is a definitive need for office space.

A nice working environment is more important than ever. Image: Shutterstock

“Occupiers still want to secure the best space possible, which is evidenced by the demand for good ESG (environment, social and governance) credentials and wellbeing facilities.”

The flight to quality will also be noticeable in other sectors besides offices, CBRE’s latest UK Real Estate Market Outlook report says.

Assets that do not match environmental goals will be “increasingly marginalised,” it adds.

Occupiers now expect all of the mod cons – high-quality changing facilities, lockers and break-out areas for breathing space.”

Derren McRae, head of Aberdeen office, CBRE.

Mr McRae said: “Occupiers understand now more than ever the importance of having not only high-quality office space, but space that offers their staff and business the focus on ESG that is being demanded at board level.

“The war for talent is becoming apparent, and only with engaging and exciting office space will occupiers succeed in attracting and retaining their best staff, but also, importantly, managing to encourage them back into the workplace.

“What we are seeing is an acceleration of arguably overdue change, with quality and sustainability at the core of decision-making.”

ESG is a key factor in office relocations. Image: Shutterstock

He added: “Occupiers now expect all of the mod cons – high-quality changing facilities, lockers and break-out areas for breathing space.

“Car charging points and cycle facilities are also now high up the requirement list for occupiers.

“In 2023 we predict that appetite for best quality offices in prime locations with strong environmental credentials will remain high.”

Green shoots of recovery elsewhere

CBRE expects buildings with greater energy efficiency or using onsite renewables to be “insulated from the worst of the energy price shock”.

The firm anticipates continued strong demand for the most sustainable and “inviting” office space.

Its report also predicts green shoots of recovery elsewhere in UK commercial property markets by the end of 2023.

But there may be plenty of activity in the north-east before then, with CBRE itself having just this week announced a move into Marischal Square, Aberdeen, next year.

CBRE plans to move its Aberdeen team into Marischal Square early in 2023. Image: Kenny Elrick/ DC Thomson

David Smith, managing director, CBRE Scotland, said: “The Aberdeen market is counter-cyclical to the rest of the UK.

“Having experienced a challenging period since the last energy sector downturn, the occupational and employment market in the north-east is the strongest it has been for eight years.

Energy sector’s new kids on the block

“We are seeing the new breed of private equity-backed energy operators growing their headcount in the city, for example, Harbour Energy, Ithaca and Neo Energy.”

“The city is also now starting to see demand from occupiers focused in the energy transition space, however, there is an ever-dwindling supply of best quality office and industrial stock to capture this.”

Energy transition is taking place inside and outside the modern office. Image: Shutterstock

CBRE’s report forecasts office investment volumes to be down 20% year-on-year in 2023, with the majority of deals likely to take place in the second half of the year.

Steven Newlands, head of capital Markets for CBRE Scotland, said: “While we forecast investment volumes will drop somewhat, the UK real estate market benefits from a diverse investor base.

“The realignment of prices towards the end of 2022 means 2023 may provide opportunities for private capital.

“We know equity is waiting on the sideline to invest, and as the markets recover investors will look to deploy and more than likely will focus on best-in-class assets.”