Do technology businesses still require a physical office space?
Will businesses require a physical office space in 20, or even 10 years’ time? This was a common debate long before the pandemic struck. However, COVID-19 has brought the question into sharper focus and, in many instances, fast-tracked the shift towards remote working for many organisations.
Some commentators have claimed that the pandemic has sounded the death knell for commercial real estate, with the “new normal” sending more employees to work from their homes. Others, though, have been quick to stress that a physical workplace will remain essential for most businesses in the long-term. After all, there are interactions and cultural factors that cannot be easily replicated without having team members in the same space.
For technology companies both big and small, it is a topic that requires even greater consideration. Indeed, their need for constant innovation, collaboration between different teams and specialist infrastructure means tech firms are more reliant on a dedicated “office” environment than organisations in other sectors.
Catalysing the rise of remote working
On 23 March 2020, the UK entered its first nationwide lockdown. Unable to travel into the office, remote working became the modus operandi for the majority of businesses almost overnight. The shift from desk-based to home working was sudden and caught many organisations unaware.
In 2019, just 5% of the UK workforce said they worked mainly from home. By April 2020, this figure had leapt to 47%, according to the Office for National Statistics(1). By the end of last year, some estimates(2) put the number as high as 60%.
Businesses have had to adapt. From adopting new technologies – such as instant messaging, video conferencing and collaboration software – through to investment into employees’ homeworking setups, there has been little other choice but to embrace the necessary changes to facilitate remote working.
Almost 12 months on from the first lockdown, many businesses and employees will have become accustomed to remote working. Naturally, this has raised the question of whether there will be a rush to return to offices, once it is safe to do so.
Embracing a hybrid model
Research has shed light on the challenging counterbalance between the benefits and drawbacks presented by remote working over the past year. This was highlighted clearly in a poll by Ipsos MORI(3).
On the plus side, the study found that 59% of full-time workers did not see remote working as a challenge – further, 54% said they had a better work-life balance as a result of offices closing, 37% felt more satisfied in their jobs, and 34% pointed to improved mental wellbeing.
However, some concerns were also raised. Two in five (40%) full-time workers admitted to struggling at least a little in adapting to remote working. Among the most common reasons for this was the lack of a suitable workspace (38% cited this as an issue); missing interaction with colleagues (36%); and having to use unreliable technology or lacking the equipment they need to work effectively (28% and 27% respectively).
Evidently, there are pros and cons involved in remote working – these are likely to have become more and more pronounced the longer employees have had to perform their jobs from home. It is perhaps unsurprising, therefore, that more organisations believe a hybrid model of onsite and offsite working will be adopted in the future. This is particularly true within the tech sector.
Indeed, professional network, Blind, conducted a survey among 3,200 senior employees from technology companies (4). The vast majority (80%) said they thought the future of work would be a hybrid of remote and in-person; just 10% thought the future was fully remote, while only 9% expected to see a complete return to the office.
If they were not already, the days of entire teams working in the office at the same time have passed. It is likely, then, that tech firms will have a more fluid system in which only certain teams or pockets of staff are based on-site on any given day.
That said, the need for a physical workspace will remain, not least to provide an alternative for employees who do not want to work from home. Further, the office will remain an important resource for fostering organisational culture, better enabling collaboration, and ensuring suitable infrastructure for the creation and delivery of technology.
Fostering a culture
A study by Gallup(5) found that employees operating remotely are less likely to feel cared for, recognised for their contributions, or that their opinions count. As such, getting a dispersed team of employees to buy into an organisation’s culture is a key challenge for tech SMEs.
Many business leaders will be acutely aware of this problem. Engaging employees – ensuring they understand the values, ethos and goals of the company, and encouraging them to subscribe to those key elements of an organisation’s culture – is imperative when it comes to staff satisfaction, productivity and retention.
A physical workspace is an important tool for fostering this culture. The space can be designed and branded to align with how the business would like its staff to work. Moreover, organic conversations and impromptu meetings can take place on a daily basis, through which particular points can be more easily emphasised than has perhaps been possible on weekly video calls.
This consideration extends to both current employees and new recruits. Indeed, the COVID-19 pandemic has resulted in many tech SMEs experiencing a spike in demand(6) for their products or services, as both consumers and businesses have shifted from physical interactions and experiences to digital ones – joint research conducted by Lloyds Bank Commercial Banking and UK Tech News found that 72% of UK tech businesses saw an increase in demand for their services between March and August 2020.
An increase in demand will, in many instances, have resulted in a need to recruit more staff. And onboarding new team members while the business is working remotely brings its own challenges, which again involves fostering a positive organisational culture and ensuring all employees feel supported and are invested in the company’s growth.
Employee training and support – while undoubtedly possible when staff are working remotely – are tasks many business leaders will feel more comfortable or better able to deliver in person.
Nic Redfern is the UK finance director at NerdWallet(7), an online personal finance platform. His company has hired almost a dozen people since the start of the pandemic, and he states: “Starting a new job can be intimidating at the best of times. But the inability to visit a new workspace and meet colleagues has only complicated matters. So, it is up to businesses to do what they can to make thorough preparations and to ensure new starters are mentally and physically comfortable in their new role.
“In the long-term, it is easy to see why many tech businesses will want to maintain some form of office, even if they no longer have a desk for every employee. From experience, it is definitely beneficial for a company to have its own space: an area they can tailor to their needs and, more importantly, enable team members to meet, share ideas and feel part of the same overall objectives. Remote working is here to stay, but the value of a physical workspace should not be understated.”
The challenge of innovating and collaborating remotely
The aforementioned Ipsos MORI study(3) uncovered that many employees felt interaction and collaboration with colleagues had declined since they began working from home. Similarly, according to the Gartner HR Employee Survey(8), 41% of professionals do not feel connected to their colleagues when working remotely; 26% feel isolated.
Clearly, for many technology companies, which rely heavily on their teams coming up with new, creative and innovative digital solutions, the problem of collaborating when offsite is a major issue.
A professor from the Massachusetts Institute of Technology (MIT), Thomas Allen, lends his name to a communication theorem(9) that underlines this challenge. The ‘Allen Curve’ is a graph demonstrating the exponential drop in frequency of communication between engineers as the distance between them increases – this, in turn, results in fewer new ideas being generated.
Put another way, the micro-interactions that occur in the workplace – when making a remark to someone sat on the desk opposite, or when walking past a colleague – are a vital part of the innovation process.
Atul Bhakta, CEO of logistic tech company One World Express(10), echoes this point: “Over the past 12 months, tech businesses have had little choice but to make do with virtual team environments and, as much as possible, foster ways of innovating when their employees are scattered around the country (or world).
“However, instant messaging and video calls simply do not offer the same inspiration or capacity for innovation as an office environment and, in particular, face-to-face meetings with colleagues. Indeed, the opportunity to share and discuss ideas organically between is one of the true benefits of a physical workspace.
“Whether potential developments are discussed over a casual coffee break, or presented then dissected within a wider team meeting, onsite interaction fuels a creative and collaborative culture. And this inevitably benefits the growth of a business, as well as the development as individual employees. To that end, it seems certain that the majority of tech businesses will maintain some form of office space in the future, even if the size and makeup of that space is likely to change.”
The need for specialist infrastructure
The need for specialist infrastructure is a third critical factor in explaining why many tech SMEs will continue to require their own workspace.
For one, reliable, superfast broadband is a must-have for almost every tech business. This is something that remote working during the pandemic has exposed, with the average employee unable to access the speeds and resilience they need from their home broadband to work efficiently and uninterrupted.
Yet superfast broadband is only one aspect of tech SMEs’ required infrastructure. Some demand more niche facilities, including laboratories, Nuclear Magnetic Resonance instruments, 3D printers, 5G testbeds and makerspaces, to name but a few. Needless to say, remote working is not a viable option for such firms – a dedicated and properly equipped workspace will be essential if they are to create and innovate.
Office space in the future: balancing needs and costs
The commercial real estate sector is entering a new era, one where office working will no longer be ubiquitous. Some companies will undoubtedly head back to full-time office working when it is deemed safe to do so, but others will continue to exclusively work remotely long after the pandemic has passed. Both cases look likely to be a minority, however, with a hybrid model of onsite and offsite working set to become commonplace.
For technology SMEs, a physical workspace will remain important. There are many reasons for this, as outlined in this article: fostering culture, onboarding staff, enabling collaboration, sparking innovation and providing specialist infrastructure stand out as the most pertinent. It is possible, though, that COVID-19 will make tech businesses re-evaluate what they need from their office.
Having desk space for their entire workforce may no longer be considered a must-have, with remote working almost certain to continue in the long-term to cater to employees’ who have enjoyed the various benefits it affords. Instead, tech businesses may prioritise breakout and meeting spaces, placing greater emphasis on enabling onsite staff to collaborate during their more limited time in the office. If this is the case, some companies might choose to relocate to a more appropriate space that can cater to their evolving needs in the “new normal”.
Whichever way managers tackling this issue in the months and years to come, changing (or making changes to) an organisation’s workspace will have financial ramifications. It is important, therefore, that tech SMEs carefully consider how upsizing, downsizing, relocating, refurbishing or abandoning their premises could impact on their bottom-line.
Our relationship managers are experienced in the tech sector and are keen to support further growth of this vibrant industry. Please get in touch today to discuss how we might help your business, too.
Darren Cable, Area Director Technology, Media and Creative at Lloyds Bank Commercial Banking.
For more information about how Lloyds Bank supports UK tech businesses, visit our website
Important legal information
Lloyds Bank is a trading name of Lloyds Bank plc, Bank of Scotland plc, Lloyds Bank Corporate Markets plc and Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH.
Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC327000. Lloyds Bank Corporate Markets plc. Registered office 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 10399850. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority under registration number 119278, 169628 and 763256 respectively.
Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is a wholly-owned subsidiary of Lloyds Bank Corporate Markets plc. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH has its registered office at Thurn-und-Taxis Platz 6, 60313 Frankfurt, Germany. The company is registered with the Amtsgericht Frankfurt am Main, HRB 111650. Lloyds Bank Corporate Markets Wertpapierhandelsbank GmbH is supervised by the Bundesanstalt für Finanzdienstleistungsaufsicht.
Eligible deposits with us are protected by the Financial Services Compensation Scheme (FSCS). We are covered by the Financial Ombudsman Service (FOS). Please note that due to FSCS and FOS eligibility criteria not all business customers will be covered.
While all reasonable care has been taken to ensure that the information provided is correct, no liability is accepted by Lloyds Bank for any loss or damage caused to any person relying on any statement or omission. This is for information only and should not be relied upon as offering advice for any set of circumstances. Specific advice should always be sought in each instance.