Rubins made the comment while discussing the future of the commercial sector with Mortgage Introducer, and as the company prepared to celebrate 30 years in business this week.
According to a January report by the Financial Times, office space in England shrunk by millions of square feet during COVID, a decline which is expected to continue due to shifting work patterns and mounting environmental regulation, including the Government’s EPC ‘C’ rating targets.
Forecasts from the sector predict that as many as one in 10 offices will become surplus to requirements in five years’ time as flexible working becomes the norm.
Rubins, whose family has been involved in property lending for almost six decades, said the commercial sector would have to readjust and adapt in order to survive challenging times, but insisted that demand for office space would remain, albeit in a different form.
“I think the era of the true institutional quality lease might have seen its day. At the end of the day, if you are a company and you need an office in the city or in the centre of Manchester, there’s no interest in the ‘in and out’ at six months’ notice (contract),” he said.
“However, for the rest of the market, I think that landlords will have to move towards a flexible working method.”
Rubins’ view is that forward-thinking landlords will offer companies better facilities and greater flexibility in a more collaborative office-style environment, that will involve flexi desk, or office sharing facilities.
“I doubt it’s over for offices, personally – we see that offices still have a position in the landscape.” he added.
However, Rubins agreed with the view that older offices which fail to comply with stringent environmental standards would be rejected by businesses.
“People will not pay for tired-looking buildings with secondary, or tertiary-style catering facilities anymore,” he said.
According to data from the Valuation Office Agency (part of HM Revenue and Customs) office space in England fell 2% in the 12 months up to March 31 last year.
At the same time, lockdown and other COVID-related issues have sparked a financial crisis in the sector. The country’s biggest cities reportedly lost up to 47 weeks’ worth of sales between March 2020 and November 2021.
And, according to a report by the Office for National Statistics, businesses in the accommodation and food service activities industry have reported having less than three months of cash reserves (including no cash reserves), at 54% in early January 2022, up from 44% in early December 2021.
Despite the difficulties, Rubins was upbeat about the market’s long-term prospects. “All you hear about is negativity around retail, but roadside retail’s having a great run. Smaller retail units – the mom-and-pop shops, as it were – have actually remained relatively strong.
“The one thing that will save offices is that there is a shortage,” he said.
“Lots of companies, for example, have taken a lot of staff for various reasons, and are restarting up. And so, anyone that’s got any aspirations in growth from a staffing level will accept, grudgingly or otherwise, that they will need some form of offices. Obviously, the growth of online is unarguable, but I think the death of retail has been overplayed.”
On the issue of the Energy Performance Certificate (EPC), Rubins was highly critical of the Government’s approach. Asked how difficult he thought it would
be to get existing housing stock up to ‘C’ rating standards by 2025 and 2028, he said: “I suspect that it’s enormously politically driven. Probably a better example of this might be over who’s going to pay for the cladding issues, and I suspect that the EPC issue is going to be watered down.
“One thing we must have learned about this Government is that they say a lot of things that are politically expedient, and they make some broad-brush comments. It’s a bit like their targets on housing. I mean, it just will not be done.”
