Office demand surges - so are major cities returning to normal?

Rightmove says the level of business owners enquiring about leasing office space has now surpassed even pre-pandemic levels in January.

Demand is now some 54 per cent higher than in January 2021 and 15 per cent higher than in pre-pandemic January 2020 according to the portal, which lists commercial property as well as residential.

The office sector started the year with the strongest growth in enquiries of any sector, as more businesses assess their office needs in the hope of moving towards a ‘new normal’.

This is not just in small towns and cities where demand is well ahead of pre-pandemic levels - demand for office space within the UK’s 10 biggest cities is now just eight per cent behind pre-pandemic levels, and up 62 per cent on January 2021.

Director of Rightmove Commercial, Alex Solomon, says: “The office sector has taken a knock since the pandemic started, with businesses cancelling their contracts, or downsizing, and there has been much talk of working from home becoming a permanent fixture for many companies. Although some businesses have decided to move to fully remote working, there are a large number introducing a hybrid policy with office working a few days a week, and others who would prefer their employees to be in five days a week. 

“Many business owners adopted a wait and see approach, but we’re now seeing many taking action to try and settle into a new routine. The bigger cities will take a bit longer to recover but there are promising signs of increased activity as we start 2022.”

In another sign of commercial property recovery, Lee Elliott - head of global occupier research at Knight Frank - says momentum has been building in London’s occupational market during 2021, with the market seeing five consecutive quarters of improving take-up. There is currently 3m square feet of space under offer and 7.5 million square feet of active demand from occupiers seeking space within the next six to nine months. 

He comments: “A number of factors are propelling the market.  Business sentiment in terms of headcount and revenue growth is now well beyond pre-pandemic levels. There is a sense of both an imminent shift from pandemic to endemic and that we will live with Covid in some shape for longer, and so a more progressive agenda is emerging. 

“Critically, as restrictions lift businesses are finally obtaining signals about what their future offices needs are in terms of both quantum and quality of space – evidence will fuel decisions.  

“We therefore expect more occupiers to devise and implement plans, particularly given the volume of lease expiries (more than 20 million square feet) occurring in the London market between now and the end of 2025. These structural events will enable occupiers to make a step-change in their office accommodation, further fuelling the much heralded flight to quality.”