Demand for London office buildings falls as staff are packed in

Each worker allocated on average 79 sq ft, down by a fifth from 20 years ago

 

Total demand for London office buildings has dropped over the past three years as companies squeeze staff into ever smaller office spaces, casting a shadow over the capital’s apparently robust commercial property market.

Space occupied by companies in London has shrunk by 3m sq ft in three years, according to Seaforth Land, a London property investor. Seaforth said a big factor in the decline was staff being packed more densely into office spaces.

Total space currently makes up more than 200m sq ft.

Tyler Goodwin, founder of Seaforth Land, said a “structural change” was taking place, although in some years it has been masked by overall jobs growth, which had underpinned demand.

“The behaviour of the market has fundamentally changed over the past five years,” he said.

Where each worker 20 years ago was allocated on average 98 sq ft – a figure that includes their share of communal spaces as well as individual desk space – the figure now stands at 79 sq ft per worker, or almost a fifth less, the company said. The figure is still shrinking.

In the years of strong economic growth after the financial crisis, rising employment compensated for this shrinkage, resulting in increases in the total amount of space being used.

But in recent years the total space, which is also affected by rent costs and whether newly built properties are on offer, has fallen.

Despite having employment growth

Mr Goodwin said the contraction in office space occupied by businesses had occurred “despite having employment growth over the past three years”.

He said concerns over Brexit had “led businesses to ask whether they want to take on more space or densify where they are”.

Serviced-office groups such as WeWork have helped to drive the trend, because they have led a push towards both hot-desking and more efficient office design.

But it is not just flexible office providers that are packing staff in more tightly.

One “leading global business services company” interviewed by Seaforth Land said they had halved space per employee from 120 sq ft a decade ago to 60 sq ft today.

Mr Goodwin said the trend would threaten landlords operating on the “traditional rent-collector model” as the market becomes more competitive.

Instead it would favour those who offer “real estate as a service”, engaging more closely with tenants, he said, adding that workers can respond well to smaller spaces if they are well designed and operated.

Separate research by CBRE in January said a division had emerged for the first time between newly built London office space and second-hand offices, with an oversupply emerging in existing space.

At the end of the third quarter of 2018, more second-hand space was available than at any point since 2010, while the availability of new buildings was at its lowest in 18 years. CBRE expects rents for “prime” offices to rise 10 per cent in five years while secondary rents fall 5 per cent.

Seaforth’s figures are based on underlying data from CBRE, a property agency, and EGi, a data service.

– Copyright The Financial Times Limited 2019

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.