The Demand for the Office Returns

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As we come out of the pandemic, optimism about returning to the office seems to be high, despite an increased thirst for hybrid and remote working.

 

Optimistic About Office Return

 

According to recent stock data, it seems that investors are optimistic about the return to the office. Despite a bigger half-year loss, the office rental firm IWG stock was headed 1.5% higher.

 

Like other companies in the same sector, they reported that the comeback pace has been slower than expected. Despite fallen revenues (14.6% decline) and decline in occupancy (6.9%), optimism remains high.

 

Additionally, office property company Derwent London gained 2% in shares following upbeat interim results. The company, whose revenue comes predominantly from London offices, shared that rent collection has returned almost to pre-Covid levels during the first half of the year.

 

According to Derwent, the estimated rental value dropped only 0.3% and vacancy rate is back down to just 2.4% of the entire portfolio.

 

Confidence for the return to the office is also being expressed through property purchases. For example, a recent £22 million deal involving the purchase of a landmark Edinburgh office building in the heart of the financial district shows signs of businesses preparing the return to the office.

 

Across the pond in the US, data from the real estate market in Lower Manhattan shows that there has been a surge in prospective buyers and renters looking to live near office buildings. Data shows that these figures are at nearly pre-pandemic levels meaning that many are expecting to get called back to the office imminently.

 

Flexible Office Working

 

Mirroring the trend in company working behaviours, demand for flexible workspace in the UK has increased by 37% for the first half of 2021. This is even higher for the suburban areas, or areas offering better work-life balance, than it is for Central London (39%).

 

Demand for flexible workspaces in “commuter belt” areas has risen substantially. This is evident across Nottingham, Reading, Leicester, Dartford and Bolton as well as a whopping 214% in enquiries for flexible workspace in Uxbridge.

 

Large property investors who have entered the flexible office segment, such as Prestige Group & Salarpuria, have seen very fast growth on the stock market since companies started to promote a “hybrid” work model.

 

These figures are higher than those of last year; demand for flexible workspace in London was declining throughout the whole of 2020.

 

Not only do flexible workspaces match the current trend of hybrid-working favoured by many companies, they can also be beneficial for employers due to their shorter lease lengths and ability to contract office space in line with business growth. This can offer a huge level of agility for companies, especially those which are less stable or SME.

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