Demand for office space set to plummet

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Date: 16 June 2020

To let sign on Bristol high street shop space

New research suggests that demand for office space in the UK could drop by up to 50% as more businesses change their attitudes to staff working from home.

The research, conducted by Instant Offices, reveals that commercial space across the country has been left standing empty and rental negotiations have stalled. It comes after 60% of the UK workforce started working from home during peak-lockdown. At the same time, many firms have struggled to cover their overheads because of the economic consequences of the COVID-19 pandemic.

At a vacancy rate of 4.5% (representing 57.6 million sq ft of empty space), Instant Offices has calculated that the amount of unused commercial office space in the UK is currently almost 50 times larger than London's O2 Arena.

Flexible office providers have already reacted to emerging trends. According to Instant Offices data, over 60% of providers are offering reduced rates or rent holidays to current clients, while commercial spaces are attracting new business with virtual tours, rent-free periods and discounts of 16% – 20%, enabling firms to sign on now at a reduced rate, for occupancy at a later date.

The report concludes that the pandemic has "shown the world that we can cope with rapid changes to the way we all work" and it predicts that there will be "a permanent shift in the way an office can meet individual needs".

The report identifies three key changes that the commercial property sector is likely to see in the second half of the year and into 2021:

  • Half the workforce could become remote: Regular remote working could become the norm for up to 50% of the UK workforce in the long-term, reducing the need for one central office space. Instead, more people will work from home or use multiple flexible spaces.
  • Demand for flexible office space will outstrip supply: Long-lease commercial property still dominates the UK market, with flexible space like co-working offices or serviced offices accounting for just 6% of the total market share. However, this is set to change as the flexible trend grows. Post-COVID-19, Instant Offices predicts that more companies will be unwilling to take on the expense of a long-term lease, or the level of risk that comes with it.
  • Tech integration will monitor employee wellbeing: Tech and wellness will become more heavily integrated into offices around the world. Office life could soon include daily online wellness checks, assigned arrival times at the office to avoid bottlenecks, and limited meetings and face-to-face interactions. AI and motion sensors could raise the alarm if social distancing guidelines are not being followed, while thermal cameras will be used to measure employee temperatures on arrival at work.

Written by Rachel Miller.

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