London’s office market shows signs of recovery amid changing working patterns
The London office market is bouncing back as a result of increasing demand for premium workspaces, with companies encouraging more staff to return to the office.
Despite some companies leaving Canary Wharf, demand for top-quality office space remains strong.
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The London office market makes a promising comeback. The latest data from property companies across the capital shows a revival of the London office market. This is driven by an increase in demand for high-quality office space, as more companies are asking staff to return to their desks.
West End’s leading landlord Shaftesbury Capital PLC has reported office leasing activity worth £4m for the period 1 July to 11 November 2024, highlighting a “positive leasing momentum for prime office space”. Central London real estate development business Helical has announced a return to profit after tax in their half year results, as well as a strong development pipeline as they expect demand for “best-in-class” office space to grow.
Companies are driving a return to the office
The revitalisation of London’s office market comes as more employers are asking their staff to make a return to the office.
Earlier this year, Santander has made the switch from two office days a week to three. PwC has told its employees that, under their new hybrid working policy, they would need to spend at least three days either with clients or at the office. Some companies have asked employees to make a full five-day return to the office. Amazon and Boots are just two of them.
Working pattern data across the UK is showing a steady increase in hybrid working styles, while working from home only has seen a decline compared to 2021 levels.
According to the latest data from the Office for National Statistics, 28% of people have been working in a hybrid model, and 44% of them have been working away from home in October. In comparison, 30% of people were working hybrid, and 40% were working outside their homes during a similar date range in 2023.
How does London compare?
Whilst there is no corresponding dataset to show how London compares to national percentages, a report from independent think tank Centre for Cities shows that office workers in central London are spending more than half of their time working from the office, which is an increase compared to last year.
In June 2024, full-time central London office workers were spending 2.7 days per week in the office – half a day longer than a year prior (2.2 days in April 2023).
Oscar Selby, Centre for Cities
The report also suggests that London’s return to the office has been slower than in other big cities. In Paris, workers spend on average 3.5 days in the office, with Singapore and New York closely behind (3.2 and 3.1 days respectively).
What is driving the return to office?
According to the Centre for Cities Return to the Office report, employers see stronger relationships among colleagues, increased collaboration, learning opportunities and ease of management as the main benefits of working in the office.
But it’s not just employers looking to get staff back into the office. The data shows that only 5% of London office workers see no benefits to being in the office.
However, data differs based on age. On average, younger Londoners spend more time in the office.
They are also more likely to see productivity gains from working outside their homes.
Productivity and working styles
The Return to the Office report from Centre for Cities shows employers and employees alike have different perspectives depending on whether they look at short-term versus long-term productivity.
In the short run, companies and staff see productivity benefits from working from home. However, when taking a long-term view, the report shows that two thirds of workers feel that working from home more would have a negative impact. Some of the reasons cited include the potential impact on learning opportunities and promotion concerns. More than 80% of employers see negatives to people coming less into the office over the next five years.
However, how much (if at all) different working styles have impacted productivity in the capital is not an easy question to answer.
There needs to be a call for evidence both in government and within firms in order to monitor productivity implications. […] But I think there are definitely benefits within certain industries of being in the office, being able to learn from the people around you, and you can see that from the fact that younger people are coming into the office.
Oscar Selby, Centre for Cities
A study from Stanford University economist Nicholas Bloom has concluded that employees who work from home two days a week are just as productive as those who work fully from the office. This is the largest study to date looking at different working patterns.
Changing work patterns are shifting office space demand
Bringing people back to the office is the driving force behind confidence in the resurgence of the office market in the capital. But the increased demand comes with requirements that highlight changing patterns in what employers and employees alike are looking for.
Based on data from commercial real estate company Cushman & Wakefield, 70% of office leasing in Central London in the third quarter of 2024 has come from Grade A office space. Grade A is a term used for the highest quality workspaces in prime locations across the capital.
In addition to overall high quality, employers are also looking for sustainability. More than half of Central London office leases have been in buildings with Outstanding or Excellent sustainable building certifications in the second quarter of this year, according to research from real estate company Savills.
Office space agency Free Office Finder have reported that 19% of flexible office providers in the capital are now pet friendly. More than 430 office spaces offer employees the option to bring their pets in, highlighting how the London office market is adapting to cater to changing lifestyles.
Looking to the future
Continuous movements in the commercial property market and mandates to return to the office show it is unlikely that we have settled into a new normal.
London still lags other global cities (when it comes to the average number of days workers spend in the office). I don’t think that it’s unreasonable to think that London will eventually get to levels similar to Paris, New York, Sydney.
Oscar Selby, Centre for Cities
With changing mindsets around returning to the office and the needs of employers and employees alike, there is uncertainty about where the future lies and what the new normal will become when it comes to hybrid working and office spaces.
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StandfirstThe London office market is bouncing back as a result of increasing demand for premium workspaces, with companies encouraging more staff to return to the office.
The London office market makes a promising comeback. The latest data from property companies across the capital shows a revival of the London office market. This is driven by an increase in demand for high-quality office space, as more companies are asking staff to return to their desks.
West End’s leading landlord Shaftesbury Capital PLC has reported office leasing activity worth £4m for the period 1 July to 11 November 2024, highlighting a “positive leasing momentum for prime office space”. Central London real estate development business Helical has announced a return to profit after tax in their half year results, as well as a strong development pipeline as they expect demand for “best-in-class” office space to grow.
Companies are driving a return to the office
The revitalisation of London’s office market comes as more employers are asking their staff to make a return to the office.
Earlier this year, Santander has made the switch from two office days a week to three. PwC has told its employees that, under their new hybrid working policy, they would need to spend at least three days either with clients or at the office. Some companies have asked employees to make a full five-day return to the office. Amazon and Boots are just two of them.
Working pattern data across the UK is showing a steady increase in hybrid working styles, while working from home only has seen a decline compared to 2021 levels.
According to the latest data from the Office for National Statistics, 28% of people have been working in a hybrid model, and 44% of them have been working away from home in October. In comparison, 30% of people were working hybrid, and 40% were working outside their homes during a similar date range in 2023.
How does London compare?
Whilst there is no corresponding dataset to show how London compares to national percentages, a report from independent think tank Centre for Cities shows that office workers in central London are spending more than half of their time working from the office, which is an increase compared to last year.
In June 2024, full-time central London office workers were spending 2.7 days per week in the office – half a day longer than a year prior (2.2 days in April 2023).
Oscar Selby, Centre for Cities
The report also suggests that London’s return to the office has been slower than in other big cities. In Paris, workers spend on average 3.5 days in the office, with Singapore and New York closely behind (3.2 and 3.1 days respectively).
What is driving the return to office?
According to the Centre for Cities Return to the Office report, employers see stronger relationships among colleagues, increased collaboration, learning opportunities and ease of management as the main benefits of working in the office.
But it’s not just employers looking to get staff back into the office. The data shows that only 5% of London office workers see no benefits to being in the office.
However, data differs based on age. On average, younger Londoners spend more time in the office.
They are also more likely to see productivity gains from working outside their homes.
Productivity and working styles
The Return to the Office report from Centre for Cities shows employers and employees alike have different perspectives depending on whether they look at short-term versus long-term productivity.
In the short run, companies and staff see productivity benefits from working from home. However, when taking a long-term view, the report shows that two thirds of workers feel that working from home more would have a negative impact. Some of the reasons cited include the potential impact on learning opportunities and promotion concerns. More than 80% of employers see negatives to people coming less into the office over the next five years.
However, how much (if at all) different working styles have impacted productivity in the capital is not an easy question to answer.
There needs to be a call for evidence both in government and within firms in order to monitor productivity implications. […] But I think there are definitely benefits within certain industries of being in the office, being able to learn from the people around you, and you can see that from the fact that younger people are coming into the office.
Oscar Selby, Centre for Cities
A study from Stanford University economist Nicholas Bloom has concluded that employees who work from home two days a week are just as productive as those who work fully from the office. This is the largest study to date looking at different working patterns.
Changing work patterns are shifting office space demand
Bringing people back to the office is the driving force behind confidence in the resurgence of the office market in the capital. But the increased demand comes with requirements that highlight changing patterns in what employers and employees alike are looking for.
Based on data from commercial real estate company Cushman & Wakefield, 70% of office leasing in Central London in the third quarter of 2024 has come from Grade A office space. Grade A is a term used for the highest quality workspaces in prime locations across the capital.
In addition to overall high quality, employers are also looking for sustainability. More than half of Central London office leases have been in buildings with Outstanding or Excellent sustainable building certifications in the second quarter of this year, according to research from real estate company Savills.
Office space agency Free Office Finder have reported that 19% of flexible office providers in the capital are now pet friendly. More than 430 office spaces offer employees the option to bring their pets in, highlighting how the London office market is adapting to cater to changing lifestyles.
Looking to the future
Continuous movements in the commercial property market and mandates to return to the office show it is unlikely that we have settled into a new normal.
London still lags other global cities (when it comes to the average number of days workers spend in the office). I don’t think that it’s unreasonable to think that London will eventually get to levels similar to Paris, New York, Sydney.
Oscar Selby, Centre for Cities
With changing mindsets around returning to the office and the needs of employers and employees alike, there is uncertainty about where the future lies and what the new normal will become when it comes to hybrid working and office spaces.
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