Demand for office space in City skyscrapers will be diminished even after the coronavirus pandemic is over, with experts predicting a major shift in the commercial property market.
As large proportions of office workers continue to work from home and physical distancing rules mean people will be unable to cram into lifts to access higher-level floors, the City of London and Canary Wharf district are expected to be among areas with the biggest shift in demand.
Property consultant Tony Lorenz said it was the “most dramatic” shift he had seen in his 50 years working in the commercial property sector.
His firm Lorenz Consultancy is working with more than 100 businesses in a range of sectors as they talk with landlords, and is currently acting for a number of banks. Even allowing for physical distancing measures, such as the separation of desks, Lorenz predicts these firms now have 20% more office space than they require.
Companies are not just planning to reduce their office size, according to Lorenz, but are looking to move to buildings where they can better control the environment and ensure the wellbeing of their workforce.
“We have had a lot of demand for self-contained buildings – demand for their own buildings, with their own security and their own people in it, so they don’t have to share lifts with people,” he said.
Speaking on Tuesday, the City minister, John Glen, said banks with headquarters in London’s financial district would need a smaller amount of office space after Covid-19.
“Some of the banks will reduce their physical footprint in terms of their square footage in the City,” Glen told an online event held by the New Financial thinktank.
Financial institutions were among the companies that completely changed their way of working and sent their colleagues home from city centre offices prior to the government lockdown, as the coronavirus spread throughout the UK in March.
The chief executive of Barclays has already predicted that there would not be a return to rush-hour journeys to large corporate headquarters, even once Covid-19 no longer poses a risk.
The vast majority of the bank’s 80,000 staff were able to work remotely during the pandemic, allowing the lender to function as normal.
“I think the notion of putting 7,000 people in a building may be a thing of the past, and we will find ways to operate with more distancing over a much longer period of time,” Jes Staley said in April.
Physical distancing will challenge companies as they work out how many staff will be allowed to work from the office on any given day.
Accessing offices in high-rise buildings will also be difficult, if a maximum of two people are allowed to travel together in a lift, and workers cannot be expected to climb dozens of flights of stairs just to get to their desks.
This view is echoed by research into officespace from the investors service at the credit ratings agency Moody’s, which said the shift to remote or home-working would be permanent for many employees.
Moody’s analysts predict a drop in demand for office space across most of Europe, especially in cities, which will push down the cost of rent.
“We expect many people will continue to work from home and tenants will want more flexible workspace. This will outweigh the demand for increased space requirements to accommodate social distancing,” Moody’s said, adding “demand for physical space in urban areas will probably decline, curbing rental growth”.
