Large companies are holding off committing to real estate deals as working patterns remain in flux.
| Demand for office space has slumped further, with vacancies reaching at least 20-year highs in the US and London, as people continue to work from home despite companies’ attempts to get staff back in the office after the COVID-19 pandemic.
Investment in London rebounded slightly to £2 billion in the third quarter thanks to a flurry of deals in the City.The sustained slowdown in the office market comes as higher borrowing costs and low occupancy are compressing building valuations while companies including Amazon, BlackRock, Lloyds Banking Group and JPMorgan have in recent months introduced staff attendance mandates on given days.
Jonathan Gardiner, head of real estate agent Savills’ central London office agency, said large companies were holding off pulling the trigger on real estate deals because they were “still trying to understand their spatial needs” as working patterns shift from COVID-induced work from home to hybrid working and an increase in mandated office attendance.Vacancies in San Francisco offices hit a two-decade high and reached a 20 per cent rate in the third quarter — up from 6.
The tech and media sectors historically boosted London’s office take up, but companies in those industries are shedding space as they experience slower growth, said Mr Gardiner. London’s vacancy rate hit 9 per cent in the third quarter, the highest since CoStar started recording the data in 2003.
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