UK sees surge in office space demand as COVID-fears wane
Demand for UK commercial property is higher than pre-pandemic levels as property experts still believe an office is essential for a company to successfully operate.
The Royal Institution of Chartered Surveyors (RICS) said its fourth quarter commercial property survey showed a swing in demand towards office space but the pandemic has changed how companies are thinking about their work environments.
Almost nine in every ten survey participants report seeing re-purposing of office space, with 15% highlighting that this is happening in significant volumes.
Over two-thirds (69%) have reported an increase in space allocation per desk following the pandemic as companies aim to ensure that the workplace is safe.
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Around 76% of contributors reported that they are seeing an increase in demand for more flexible and local workspaces as the pandemic showed that working from home is possible.
“Sentiment appears to have largely weathered the uncertainty brought on by the rapid spread of the Omicron variant in recent weeks, although the green shoots of recovery that appeared to be emerging in office tenant demand seem to have been put on hold for now,” Tarrant Parsons, RICS economist, said.
“Longer term though, a strong majority of respondents still consider office space in some form to be essential for businesses to operate successfully. That said, it appears more flexible or local spaces are very much in favour which could well prove to be a lasting legacy of the pandemic.”
As COVID restrictions lift across the UK, 66% of respondents still believe an office is essential for a company to successfully operate.
Across all sectors, investment enquiries rose for the fourth successive quarter, leading to capital value expectations rising for the year ahead. The industrial sector continues to lead, with a net balance of 84% of respondents expecting prime industrial values to increase over the next twelve months.
The RICS outlook is also positive for prime office values, as a net balance of 24% of respondents foresee an increase during 2022.
Investment enquiries from the UK and overseas slightly increased this quarter.
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However, it is a completely different story when it comes to shops. Investment enquiries into the retail sector slipped this quarter with 16% of respondents reporting a fall in domestic enquiries and 17% reporting a fall in foreign investment enquiries.
A separate study found that more than three-fifths of the UK’s commercial landlords are struggling to attract tenants to traditional offices as businesses’ workspace demands have changed rapidly during the pandemic
The figures by infinitSpace show that 62% are currently struggling to attract prospective tenants to fill their traditional office spaces.
Almost two thirds (64%) reported having seen a “notable shift” in tenants’ demands during the pandemic, including terms and use of space.
As a result, seven in ten (71%) office landlords plan to increase their flexible workspace offering in the coming five years.