London's empty offices put the economy in a quandary

London| Schroders, a big asset management firm, wants more of its workers to return to its office in the city of London. Over the northern summer, it encouraged people to come in for a day to test their commute and so the firm could demonstrate the new safety measures in place, including an app to order food from the canteen.

Last week, about 15 per cent of its 2500 employees were in the office.

A 15-minute walk away, in the building where the law firm Dentons employs 750 workers, fewer than 10 per cent were in the office. Two streets to the west, Goldman Sachs' new 826,000-square-foot (76,737-square-metre) European headquarters was about 15 per cent full. In east London, in Canary Wharf's cluster of towers, Citigroup had about 15 per cent of its employees in an office that usually fits 5000. In cities across the country, the offices of the advertising firm WPP were only at 3 per cent capacity.

Britain's sparsely populated offices have put the economy in a quandary. The dry cleaners, coffee shops, lunch places and clothing retailers specialising in suits that serve areas packed with offices are starved of their customers. Many are still shut. In a country that relies on consumer spending to fuel economic growth, the government and business lobby are urging people to return to their offices, pressuring civil servants to set an example, and in turn spend more money on food and travel and in city centre shops.

Earlier this month, Dominic Raab, a government minister, said, "The economy needs to have people back at work."

But the companies charged with responding to this call have discovered that they can function productively with their staff working at home, and many aren't in the mood to ask employees to risk getting on crowded trains or buses to return to the office.

Take the city of London, the financial and legal hub, which before the pandemic was the destination for more than half a million daily commuters. At the start of the month, many of the lunch chains were still unlit and locked, and the train stations were significantly quieter — so were the pubs.

"The people are just not coming back," said Robert Cane, who has worked at a dry cleaners and shoe repair business in the city for the past six years. "Half of the people have left the offices. I'm watching them evacuate daily."

In the spring, Britain entered its worst recession since record-keeping began in 1955. After a sharp decline in economic activity during the national lockdown to control the spread of the coronavirus, a rebound started to take hold as early as May. The strength and sustainability of that recovery is still being determined, though there are concerns it will be short-lived as coronavirus cases rise in Britain and on the Continent.

Catherine McGuinness, policy chair at the City of London, the district's governing body, said she was "very concerned" about the lack of foot traffic for the small businesses dependent on office workers, especially in the coming months as government support programs end. The corporation has offered rent holidays and business advice, but "it's just a conundrum" for those businesses, McGuinness said.

"I do think there is a major challenge looming about unemployment rates and insolvency rates," she said.

Outside Britain's city centres, activity is returning faster and online shopping has helped push retail sales above their pre-pandemic levels. But foot traffic in shopping areas is still down a quarter from last year.

Last month, after months of encouraging working from home, the British government changed its advice: People could return to their workplaces if employers made them safe. After only a trickle of people responded, the government planned an advertising campaign — to coincide with the reopening of schools last week — to reassure employees that workplaces have been made safe over the summer. That campaign has reportedly been delayed as ministers study a jump in infections across the country. Last week, new restrictions were put in place in England banning gatherings of more than six people, but they don't apply to workplaces.

People aren't worried about being in the office. What they're worried about is getting to the office.
— Emma Holden, global head of human resources at Schroders

Even if the campaign works, social distancing measures that reduce the capacity of workplaces will continue to suppress the office-dependent economy. It's a problem that isn't unique to Britain.

"Our policy is that we won't have more than 25 per cent of any one floor," said Jeremy Cohen, Dentons' chief executive officer for the United Kingdom and Middle East. While this policy will be reviewed next month, the law firm is still far from reaching this capacity, he said.

In the long run, the pandemic has raised questions about the entire nature of the office economy. The role of the office could substantially change as many companies consider how to make some, or all, aspects of remote working permanent. A deputy governor of the Bank of England warned that a lack of investment in commercial real estate could be one of the reasons the long-term economic impact of the coronavirus might be worse than the central bank recently forecast.

In July, Dentons said it would close two of its six offices in Britain, and the company is reviewing the ones that are left. In the future, Cohen said, he expects to see a "very different" arrangement, where the offices are designed for more flexible working to accommodate teamwork and training, but could also be smaller.

Association Coffee is a shop across the street from a city of London train station. It used to have five employees making about 600 coffees a day; the morning rush could cause a 10-minute wait. Now just one person makes coffee.

Christian Baker, the shop's manager, said that its business was a direct reflection of the number of workers in the surrounding offices, and that to break even he would need to sell 2 ½ times the current volume of coffee.

"I have massive empathy for the people who are working from home," Baker said. "I understand why you wouldn't want to come in when you can do your job remotely." The problem, he added, is that "we're in the position of serving them".

A short walk away, James Shoe Care is running at a loss. Cane, an employee, said he was worried that he'd be without a job once the government's program for stood-down workers — which provides him wage subsidies — ended next month.

"If the offices are empty, then we get no work," Cane said. "That's why I'm only getting four, if I'm lucky five, people a day. And that's just people who live around here."

The sticking point for central London is that many people must commute by mass transit, where social distancing would have been difficult, if not impossible, during pre-pandemic rush hours. After Britain's August bank holiday, which unofficially marked the end of summer, use of National Rail was only a third of last year's volume. In the past week, the number of journeys on the London Underground have risen noticeably but are also only a third of last year's. In Britain, fewer people coming out of lockdown are using public transport again than in France, Italy and Germany, according to Google Mobility Reports.

"People aren't worried about being in the office. What they're worried about is getting to the office," said Emma Holden, the global head of human resources at Schroders. "Seventy-five per cent of our people commute. That is probably the greatest source of anxiety."

Though Schroders had been a proponent of flexible working before every company was forced to be, Holden said employees would still be expected to regularly go into the office and work with their teams. Now, with socially distanced desks and a one-way system for walking around the work space, the office can hold half of its normal capacity, she said.

Employees are asked to speak with their manager if they are worried about returning to the office, Holden said. "And if there's a reason why you can't come in, then that's OK," she added.

She said that there was no deadline to reach 50 per cent capacity but that having teams working together in person was important for innovation. Nonetheless, the firm has decided to roll out a new flexible working regime globally.

For the coffee shops and dry cleaners, fewer office workers will be a lingering problem. But the businesses' customers aren't ready to shoulder the burden of their survival.

"I think we have much more of a hybrid going forward, so people will probably come and work two or three days in the office," said John Lucy, the human resources director for Dentons in Britain. "That will have a massive impact on the local shops, restaurants, bars around the place. To be honest, I'm not quite sure what we can do about that."

The New York Times