The UK’s office space in decline

Thursday 10 February 2022

During the Covid-19 pandemic, flexible working became an everyday part of life for many. The ambiguity surrounding office use is evidently present in our own home city of Leeds, as it only takes one to stroll through the modern office buildings of Wellington Place, where you are now able to hear a pin drop due to its eerily quiet nature, to understand that most of the workforce are opting to work from home. The knock-on effect of the working-from-home culture that has developed during the pandemic is that the amount of office space across England has been shrinking. Figures suggest that the total amount of office space shrank by 2% over the past year, representing 1.67 million square metres.[1]

Global real estate services provider, Savills, have forecast that although the occupancy levels of offices will rise in 2022 beyond the 25% levels seen during 2021, that working from home will continue beyond the pandemic.[2] They have concluded that this will mean 1 in 10 current office spaces will be surplus to requirements in five years’ time, with companies capitalising on the working-from-home culture by saving money on renting office space. It has been suggested by the Financial Times that this statistic will be more pronounced in smaller cities[3] and areas away from business districts, which could in turn have a huge effect on these smaller urban areas as there will be less footfall through their towns and city centres, which could have a huge effect on other local businesses and trades.

It is not only working from home that is pushing businesses and tenants away from their office spaces. The increasing demand on offices to meet environmental standards is leaving many older, ill-equipped commercial buildings lying dormant. This though is creating new opportunities as the government’s move to expand permitted development rules will allow developers to convert older commercial buildings into housing. Furthermore, in an attempt to lure staff back to the office, businesses are increasingly looking to upgrade their office spaces to meet the growing demands of their workforce and also of the stringent environmental standards that have been brought in as part of the government’s aim to reach Net-Zero by 2050.[4] These opportunities for developers and businesses underline that not all hope is lost.

Despite the impact of the effective vaccination program roll out by the government to tackle coronavirus and the emerging variants of coronavirus, office occupancy by staff continues to be even more of a challenge. However, it remains to be seen how the occupancy levels will fluctuate during 2022 considering the government’s recent announcement to scrap all Covid measures by 24^th March and as business leaders plans to push for an end to the working-from-home culture, particularly following the removal of Plan B measures as of 27^th January which includes the advice to work from home.[5]

The next twelve to eighteen months will be extremely interesting with regards to the commercial property sector as businesses figure out how they want to utilise their office space and the way in which developers see these spaces potential unfolding in the future.

[1] Office space shrinks by millions of square feet in England | Financial Times (ft.com)

[2] Savills Blog | Five themes for commercial real estate in 2022

[3] Office space shrinks by millions of square feet in England | Financial Times (ft.com)

[4] Net Zero Strategy: Build Back Greener – GOV.UK (www.gov.uk)

[5] England returns to Plan A as regulations on face coverings and COVID Passes change today – GOV.UK (www.gov.uk)

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