Office demand increases to pre-covid levels

Office demand has been increasing across the country. In London, Q2 2022 data shows that office take-up was up by 153% compared to the previous year. Office demand has similarly been increasing in cities such as Manchester.

Just what is driving the surge back to the offices? There are a few possible motives.

The impact of Covid-19

Covid-19 restrictions made it hard for many businesses to continue operating normally. Many companies urged employees to work from home and many closed their offices altogether. 

Some companies have continued to stick with remote working with some even deciding not to renew office leases in favour of a virtual office. Meanwhile, many startups that launched during the pandemic decided to not take on office space as a way of saving money and abiding by restrictions.

The pandemic also caused some companies to lose business. Many UK companies went bust, which led to a further increase in vacant office space. Others decided to give up their office space and continue working from home to cut costs and stay afloat. 

By the end of Q2 2021, office vacancy rates were double pre-pandemic levels in cities such as London. This led to many people proclaiming the ‘death of the physical office’. However, as the last year has shown, there has been a revival. 

A slow recovery

Many companies have been slowly recovering from their 2020 losses. Some have been able to claw themselves back and are now in a better situation to look for office space. This includes many home businesses that would have otherwise moved to dedicated office space in 2020. 

Some companies have meanwhile been holding out due to health reasons, waiting the majority of the population to be vaccinated before taking out an office lease and hiring employees. In the summer of 2021, most people had still not been vaccinated, however by the beginning of this year most of the population had received their two jabs. This has reassured companies that it is now safe to move to a physical office and hire employees. . 

Growing pressure to get back in the office

Bosses across the country have been eager to get their staff back in the office. A study found that 4 out of 5 bosses worried that their staff were not being as productive at home. 

Some employees have been resisting, however bosses have been largely winning the battle to get people back in the office. This mass return-to-the-workplace has helped fuel office demand with many companies having second thoughts about running an entirely virtual business. 

The race for cheap office space

Because the pandemic reduced demand for office space, it led to office prices dropping across the country. Now that demand is back up, prices are rising again. Consequently, many companies are now racing to snatch up office space while rates are relatively cheap.

Right now, the availability of office space to rent is high, and rates are still low in many places. However, as office occupancy increases, rates could eventually increase beyond pre-pandemic rates. This is likely to be driving the sudden increase in office demand – companies are eager to take out a lease now before costs potentially become too high. 

The rise of hybrid working

Hybrid working is likely to be the future business model for many companies. It involves letting employees work from home on certain days, while encouraging them to come into the office on other days. 

A hybrid working business model means that while companies still need office space, they don’t need quite as much space. Because some employees will be working from home each day and others will be in the office, hybrid working companies can get away with less desks. Large meeting spaces are also not as necessary.

This business model has created increased demand for smaller office spaces. Some companies are deliberately downsizing so that they don’t have to pay such large bills. Other companies that were previously entirely remote are testing out the hybrid business model for the first time. 

This could mean that larger office spaces continue to sit vacant while smaller office space becomes more competitive. However, the rise in shared office space also means that larger offices may still continue to be occupied, providing that office owners are willing to let multiple companies lease out these spaces. 

All in all, the physical office is definitely not dying – if anything the office market is seeing a boom. Businesses looking to grow should definitely still consider office space. 

26/09/2022