The COVID-19 pandemic had a dramatic effect on the demand for office space in 2020. With the government prohibiting people from going to work unless they couldn’t work from home, the need for traditional commercial office spaces fell steeply as businesses adapted to using technology to keep their businesses functioning well. With the consensus seeming to be that home working was working well for employers and staff alike, speculation that the pandemic would remove the need for office space for good suddenly seemed a very real prospect.
Now that restrictions have lifted and we begin to adjust to a new normality, businesses are left considering whether investing in office space is still worthwhile. Here we take a look at recent developments.
The easing of restrictions and recent developments
Attitudes began to shift in 2021 when restrictions began to ease. For many businesses, it became apparent that staff permanently working from home would not be feasible in the long-term. The comforts that come with working from home could not outweigh the benefits of the office, such as collaborative working, prompt IT support and in person social interaction. With staff and employers alike keen to begin working in the office again, the demand for premises increased in 2021.
In the Midlands for example (where Else Solicitors LLP are based), Innes England reported notable improvements in the uptake of office premises in 2021. Significantly, there was a 43% rise in the Derby office take-up from 2020. In Nottingham, the take up in the office market recovered to pre pandemic levels. In Leicester, the office market made a strong recovery with 429,000 sq ft of activity recorded (up 122%).
Similarly, research has revealed that investment into London offices has returned to pre-pandemic levels. Data from property agent CBRE found that investors pumped £11.3bn into office transactions last year, matching 2019’s figure. Savills has anticipated take-up of approximately 8.2 million sq ft of office space across central London in 2022. Canadian investment giant Brookfield snapped up a £635m office building purchase in the City, demonstrating confidence in London’s office market post Covid-19 has certainly not left. Google announced in January this year that it would purchase a London office building for $1 billion.
Considering investing in office space?
The demand for office space is clearly alive and prospering. If you’re thinking about investing in office space, you should consider how your business needs have changed and the lessons you have learnt about working practices during the pandemic. If you are a tenant and your lease is due to be renewed, it is a great time to negotiate your terms for greater flexibility. For landlords and tenants alike, it will be well worth keeping an eye on how the market continues to develop and what type of clauses parties will seek to negotiate to alleviate the commercial risks that may arise from future unexpected events.
Else Solicitors can advise you on your commercial property requirements, including freehold sales and purchases, leases for both landlords and tenants, and re-financing. We act for a variety of businesses and their pension funds in respect of all types of commercial properties including shops, warehouses, restaurants and offices.
If you would like to discuss your commercial property matters, please contact our Commercial Property team on 01283 526200.