January 22, 2024
London’s office market continues to adapt to evolving workforce demands. The normalisation of hybrid and flexible working since the pandemic remains the biggest cultural shift that the office sector has witnessed in decades. In addition to the rise in demand for quality-as-a-must in 2023, collaboration, culture, and connectivity will lead the charge for office space trends in the year ahead.
Most people rightfully take 2019 as a defining line in the sand moment for the UK, comparing life before Covid to now, and the flexible workspace industry is no exception. The long road to economic recovery after multiple lockdowns shaped 2022, in which ‘long’ became the de facto word for the industry seeing little change in capital values for commercial real estate, including office space, in 2023 after a fall of nearly 20 percent in the latter half of 2022 (CBRE). 2023 became the year of stability as our new normal bedded into workplace life. Looking to 2024, it is likely that we will continue to see market disruptors shape the trajectory of office leasing, as operators look to capitalise on this stabilisation, expanding their flexible offering amidst rising demand.
We anticipate a steady incline in businesses leasing flexible workspaces throughout 2024. Cushman & Wakefield has forecast approximately 8.5 million sq ft in Central London office lettings for the year ahead, which the firm has described as a “normalised pattern” indicating an evolution of the market. As companies aim to set themselves apart in an increasingly crowded market, distinct leaders are poised to emerge.
With an ever-growing spotlight on employee experience, 2024 will also be the year for flexibility, as well as quality
The value placed on offices’ ‘human’ elements persist. Our latest research found that of 10 criteria, connecting in-person remains essential and the most valued part of office life, with nearly half respondents rating social interactions as the top workplace benefit (45 percent). This was closely followed by 43 percent pointing to better collaboration on projects, and 36 percent citing easier face-to-face meetings. These results reaffirm the value of high quality, physical office spaces, showing their continued relevance in fostering human connections and creativity.
With an ever-growing spotlight on employee experience, 2024 will also be the year for flexibility, as well as quality. Flex space allows businesses to dictate their own culture, ensuring employee, colleague, and client experiences align with their brand and business values, with the unique ability to adapt and evolve over time. Further, the Employment Rights Bill on flexible working reached royal assent earlier this year and will come into action from Spring 2024. This could make it even harder for businesses to plan ahead and assess utilisation rates of their office space, making flex space a ready-made solution. With a growing appreciation for the benefits of flex space among occupiers as an addition to traditional leasehold acquisitions, we are likely to see more businesses scale up at peak times or when short term growth requires more space, which is particularly important for start-up or scale-up businesses.
Demand for coveted Grade A office space will be another continuing trend in 2024, with reports from industry leaders such as JLL emphasising share of Grade A leasing up 10 percent versus pre-pandemic levels. Continued interest in these high calibre spaces plays into the broader need for office space to appeal to employees’ needs, whether that’s greater connectivity, higher quality facilities, amenity-rich locations, or commitment to sustainable spaces, with employers finding themselves under more pressure than ever to deliver in order to attract the top talent. Flexible workspace providers will need to continue improving offices, along with the wider office sector, to stay competitive and relevant. Striving to deliver optimal office quality will play a critical role for 2024.
Along with improved employee facilities, ESG reporting and responding to tighter MEES regulations is no longer a nice to have, but a necessity for businesses. The spotlight on sustainability has already prompted a surge in office refurbishments according to Deloitte’s London Office Crane Survey, indicating a collective industry endeavour toward a more sustainable, future-ready office landscape. Commercially, this will play a significant role for occupancy rates, with Savills reporting that 52 percent of London office take-up in 2022 and 2023 was of buildings rated BREEAM Excellent or Outstanding. Building owners are now racing to outpace obsolescence.
Overall, the horizon of London’s office market in 2024 will be defined by quality. With hybrid here to stay, the future of the office remains rooted in flexibility. Yet in an ever competitive market, those businesses which best incorporate high calibre office spaces into their portfolio will position themselves for success. Flexible operators hold the key to driving forwards new standards in what quality means, with premium connectivity, collaborative environments, and business culture high on the agenda.