The extent of these reductions is expected to be relatively modest, as only a few companies intend to go completely remote. The survey, which focused on employers with over 50,000 employees, indicated that these organizations plan to reduce office space by roughly 10% to 20% over the next three years. This decision stems from a thorough reevaluation of their office space needs in light of the remote working trends that emerged during the COVID-19 pandemic.
On the flip side, companies with up to 10,000 employees scattered across different regions are largely anticipating an increase in their office space requirements.
Among the 350 multinational businesses included in the survey, collectively employing 10 million people worldwide, a majority expressed their intent to embrace a “hybrid” work style. Nonetheless, 31% of these companies are opting for an “office-first” or “office-only” approach, necessitating a reconfiguration of their office spaces.
According to Tim Armstrong, an executive at Knight Frank, adopting an office-centric approach within a more flexible working environment will demand a fundamental restructuring of the workplace.
While commercial property construction in the UK has demonstrated resilience in contrast to the residential sector in recent years, both are currently facing challenges posed by rising interest rates and broader economic headwinds. The Bank of England is set to raise the Bank Rate for the 13th consecutive time on June 22, from 4.5% to 4.75%, in an effort to control inflation, which unexpectedly spiked at 8.7% in April.
Antony Antoniou, the CEO of real estate firm Robert Irving Burns, has expressed concerns about a potential recession, emphasizing that businesses are currently prioritizing debt management over growth investments.
Property development and investment firms British Land and Land Securities have also noted headwinds stemming from interest rate hikes and ongoing uncertainty surrounding shifts in work patterns.
Nevertheless, the S&P Global/CIPS UK Construction Purchasing Managers’ Index (PMI) published on Tuesday demonstrated increased construction activity, particularly driven by the commercial sector.
Mat Oakley, the Head of Commercial Research at Savills, stated that demand for office space in London has risen, and the challenges associated with flexible working seem to have been somewhat overstated, especially when considering employment growth.