UK Broker Breaks Ranks, Says UK Occupiers Will ‘Dramatically Reduce’ Office Space
The message from major UK property agencies has been pretty consistent since the beginning of the pandemic. Yes, fewer people will come into the office every day. Yes, companies might reduce their office space, but only slightly. Nothing to frighten the horses.
But a new report from LSH has laid out one of the starkest warnings yet about the impact of the changes underway in the way people work on UK office owners.
Despite a widespread desire to increase office usage, very few businesses seem set to increase their office footprint in the short-to-medium term. Just 8% of the survey’s respondents reported any plans to increase their space requirements, while an overwhelming majority (72%) indicated that they plan to reduce the amount of space they occupy — even assuming a static headcount.
Crucially, the survey found they wanted to make these reductions "at the earliest available opportunity". And the size of the change is not going to represent a tinkering around the edge. More than a quarter of respondents (26%) cited a preference to reduce their office space by over 40%. This, combined with ongoing pressure for businesses to make a positive contribution to ESG matters, will likely result in a flight to quality as occupiers focus on utilising less — but better quality — space.
While the best office space will undoubtedly continue to attract occupiers, those with limited amenities and poor environmental credentials are likely to be pushed into obsolescence. On this basis, LSH estimated that, in the south-east office market alone, up to 26M SF, equivalent to twice the entire office stock of Reading, could be rendered surplus to demand over the next decade.
Though an alarming statistic in isolation, LSH predicted that this reduction in demand for ageing office stock will be mitigated to a large extent by increased demand for alternative uses, such as residential, logistics, life sciences, studios and education. This presents several opportunities, but it will require a creative, agile and flexible approach from both landlords and planning authorities.
The survey revealed that just 15% of occupiers are reporting workplace attendance of four days a week or more, compared to 90% pre-pandemic.
An overwhelming majority (72%) of businesses are experiencing office attendance of three days a week or fewer, a trend that appears to have taken hold as a new established norm.
On the face of it, current workplace patterns seem to point toward enlightened and progressive employment policies, yet the survey responses paint a different picture. Close to two-thirds (62%) of occupiers indicated they have — or soon intend to — put in place firmer measures to encourage an increase in office attendance.
In spite of this, the changes in working patterns are going to see demand for offices reduce.
LSH said the survey was conducted in June 2022 and received responses from senior decision makers across a range of business sectors including public sector, construction, pharmaceutical/healthcare, professional services, TMT and financial services. With a sample ranging from small and midsized enterprises to FTSE 100 companies, more than half of respondents (52%) employed over 200 staff.
