Companies operating in London are moving to downsize their offices and abandon traditional long leases as a result of the shift to remote work due to the Covid-19 pandemic, Invest-Gate reports.
A quarter of companies in the metropolitan area shrink their offices, while 18% of companies opt for co-working and flexible office spaces, according to the Bloomberg Intelligence survey of 500 employees in London.
The trend is fueling an increase in vacancies and a gap between rents for hotly sought-after new office space and old ones that companies are shying away from, Bloomberg Intelligence Analysts Sue Mondine and Cyrine Bouzid write in a research note on Thursday.
The long-term impact of the remote-working experiment, which suddenly began to play out during the pandemic, has seen companies ending more office leases and ensuring that employees are reluctant to return to work from the office.
Although office occupancy levels have gradually risen from their lowest levels during the pandemic, the survey results indicate that more companies are beginning to embrace the idea of flexible working.
“The era of working from home is increasing the polarization on the basis of space and rents between high-end offices owned by REITs such as Derwent London Plc and Land Securities Group Plc, and low-level office space,” Mundine says.
In Bloomberg’s survey, 73% of respondents say their company plan to move or already moved to new premises, compared to 50% of respondents last June, leaving plenty of old buildings vacant, with vacancy rates in some central London boroughs even exceeding 10%.
The survey also reveals that 70% of the employers participating in the survey implemented a permanent policy on flexible working, while the situation is still unclear about the plans of the remaining 30% beyond this year.