Quantity of office space declines by one million square metres
The quantity of office space fell to 87.9 million square metres in 2019/20, from 88.9 million square metres in 2018/19, according to data collected by Search Acumen.
The loss of office space since 2014 is the equivalent to shutting every office in Manchester, the research shows.
Findings show that the fall in office space over the last year marked a sixth successive year of decreasing office space.
Office space in Broxbourne fell by the largest amount, dropping by 16% in the last year, down to 60,000 square metres in 2019/20 from 72,000 square metres in 2018/19.
In contrast, Newham saw the greatest increase, up 38% over the last year, rising to 333,000 square metres in 2019/20 from 241,000 square metres in 2018/19.
According to Search Acumen, the use of flexible and remote working was increasing even before the onset of the pandemic.
Caroline Robinson, commercial real estate business development manager at Search Acumen, said: “This research reveals that a sustained decline in demand for physical office space was underway even before the onset of COVID-19.
“The contraction of office space is likely to accelerate in the coming years, triggered by firms assessing the necessity of their real estate footprint after large swathes of the workforce have effectively adapted to work-from-home practices.
“While the need for office spaces has not completely disappeared, commercial real estate investors need to incorporate the likelihood of lower occupancy rates into their risk assessments.
“Rents in the office sector are likely to fall further due to decreased demand from potential commercial tenants and existing tenants attempting to restructure leases to better align their cost base, which will put downward pressure on yields.
“The rapid deployment of vaccines across the UK provides hope that normal levels of economic activity may return in the medium-term.
“As the economy begins to reopen, workers may start returning to the office, which will increase the need for firms to retain offices.
“While an unwelcome event, the pandemic has triggered the modernisation of work practices in many sectors and put the real estate sector in a better position to face uncertainty head on.
“Greater adoption of technology and data consumption in the commercial real estate market is improving the quality and availability of information on office assets.
“This will help potential investors and firms make more effective capital allocation decisions and adapt to changing market conditions.”