Remote working alters the office landscape

The surge in remote and flexible working since the onset of the Covid-19 pandemic has had a dramatic effect on the demand for office space in London.

Sustainable green co-working office space.

David Sapsted

22 November 2022

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Two new surveys have shown that, on one hand, demand for office space in the capital has dropped - and will continue to drop - substantially.On the other, there has been been a rise in demand for high-quality offices offering increased sustainability and wellness ratings.

'Flight to quality'

Deloitte's latest London Office Crane Survey brands the latter trend a "flight to quality" at a time when 70 per cent of London's biggest developers say they expect a ten per cent fall in demand for ordinary office space in the longer term.Indeed, a second survey conducted by law firm Boodle Hatfield found that about 1.8 million square metres of office floor space had been taken out of use in the UK over the past year, with most of that being lost in London.Both surveys found the falling demand for office space to be driven by an accelerating shift to hybrid working.But the Deloitte report added: "Tenants are increasingly seeking better-quality office space with higher sustainability and wellness ratings.”

Demand for Grade A office space to increase long term

It said the largest leasing deals in the capital were focused on space in recently completed, under construction or soon-to-start schemes. "We expect overall demand for Grade A space to increase over the long term, despite reduced total office requirements per occupier as a result of this over-arching trend (in remote working),” the report said.The Boodle Hatfield research found that hybrid working had resulted in some businesses significantly reducing their office space by sub-letting or, in some cases, choosing not to renew leases.According to the firm's report, commercial landlords who found themselves struggling to find replacement tenants were taking properties off the market for redevelopment, either to turn them into higher quality office space or for change of use to residential properties.David Rawlence, Senior Associate at Boodle Hatfield, said: “London has seen significant amounts of office space being taken out use in the past year – with prime central locations accounting for the greatest losses.“Businesses that have adopted hybrid working models may not be prepared to lease the same amount of floorspace as pre-pandemic or may be unwilling to commit to space which is not Grade A."

Making offices attractive places to be

Siobhan Godley, Deloitte’s UK Real Estate Leader, said in her introduction to the firm's report that the shift towards refurbishments could be a symptom of developer caution.She said that with flexible working now established, “developers, transport bodies and local authorities are combining to make offices a destination”.Ms Godley added: “In addition to high standards of sustainability, occupiers now want offices that are bright, airy and attractive, and surrounded by shops, bars, gyms and restaurants.”

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