Office REIT Shares Stable In Spite Of New Work-From-Home Order

Shares in the UK’s largest listed office owners were broadly unmoved in the wake of new government guidance that is likely to further delay the much-anticipated return to the office. 

Shares in Great Portland Estates, Derwent London, Workspace, Landsec and British Land finished in a range between 0.5% down and 0.5% up on Thursday, the day after the government advised all UK workers to work from home, if possible. 

Working from home is not currently a legal mandate, just advice, but large employers like KPMG have told staff not to come in except for critical business purposes, The Guardian reported, while PwC has said staff can come into the office if they feel their mental health is being impacted by a prolonged spell working from home. 

The two companies that did see shares dip slightly more significantly were flexible office provider IWG, whose shares fell 2.6% on Thursday, and Helical, which saw shares fall 1.6%. IWG’s shares are down 17% so far this year, with first the delta and now omicron variants postponing the return to the office. 

Data from Remit Consulting showed that at the start of November, before the emergence of the omicron variant, UK office occupancy was just 21%, and had reached a plateau over the preceding weeks. That is compared with about 80% before the pandemic. 

When commenting on the work-from-home guidance, real estate bodies flagged not just the impact on office owners, but on the ancillary industries that rely on office workers for their income. 

“Public health is paramount, but we’d hope that guidance on working from home would be kept under review against a rigorous risk assessment and take into account the crucial role that office workers play in city centre economies,” British Property Federation Chief Executive Melanie Leech said. “A vast number of jobs across the retail, leisure, hospitality and culture sectors that have been protected by the furlough scheme now depend on footfall from nearby offices. Huge investment has gone into making sure that offices are safe environments and we are widely seeing the undoubted mental health and productivity benefits of work colleagues being able to meet together again.”

“Throughout the pandemic it has been made clear that central London’s economy depends on both office workers and visitors, which meant that it was disproportionately affected and has also been slower to recover,” Heart of London Business Alliance Chief Executive Ros Morgan said.

Morgan added that reintroducing restrictions that keep people home would be costly, particularly in the hospitality and retail sectors.

"If government is heading down this path it will need to also provide support for the businesses affected, given furlough and previous support measures no longer exist," he said. "This is the only way to save jobs and guarantee central London’s survival and recovery.”