Spaces - reoccupy, reimagine, relocate
There has been no shortage of column inches dedicated to the future of the office over the last three years.
2 minutes to read
The high volume of assessments of the post-pandemic workplace has matched the scale of disruption brought to the workplace by the pandemic. Revolution was firmly in the air.
At first glance, the statistics might support such a view. Total take-up of more than 6 million sq ft across the UK cities in both 2018 and 2019 reduced markedly to just over 4 million sq ft in 2020, before recovering to 5.5 million sq ft in 2021 and 5.4m sq ft in 2022.
Yet while transactional levels have fluctuated against the backdrop of Covid-19, occupiers, typically, have not made knee-jerk or radical decisions about the quantum of real estate needed going forwards. Across the UK cities, there have been examples, but not the great offloading of extra space that was so characteristic of the immediate GFC period.
Instead, occupiers have recognised that amid a great global workplace experiment, the prudent thing to do has been to evaluate recent experiences within their business and use those to shape future office requirements. These signals have further been strengthened by a steady rate of office reoccupation, which now stands at 40-50% across key UK city markets - a higher rate than in London and the South East.
For the coming 12 months, lease events will be the primary driver of occupier activity rather than substantial or sustained expansionary activation. Lease events will allow occupiers to right-size and reimagine their portfolios and assets. Significant downsizing is unlikely because economic conditions may fuel job insecurity and increase return to office rates. Significantly, occupiers will gravitate towards high-quality, amenity-rich offices that provide users with a first-class workplace environment and experience.
A significant consideration for occupiers will be the purpose of the office space they hold and any subsequent reaction against traditional configurations. The office will be a place for connection, collaboration and galvanising corporate culture, which the remoteness of the pandemic has dented. Many will realise that their existing space is functionally obsolete – a product of a different era of work. This will be compounded by physical obsolescence, with many offices falling short of upcoming sustainability regulations, notably around energy efficiency. A recent Knight Frank Study found that 78% of offices across the regional UK cities held an EPC rating less than the required B rating.
These pressures will inevitably bring greater mobility of occupiers and a rise in relocations to secure the most suitable space in the right size and place. Consequently, greater polarisation in the office markets of key UK cities will develop, as occupiers seek out best-in-class options against the backdrop of a tightening pipeline of high-quality space - a reaction to a slowing economy.