Anybody looking for office property to rent in central London now has more choice and better leverage than at any time in the last 15 years.
Research from real-estate data business CoStar reveals that London’s unlet office space totalled circa 31m sq ft in August – up by more than 50% from the end of 2019 and equivalent to around 60 Gherkin buildings.
This doesn’t bode well for city-centre property owners or for bosses still hoping to cajole employees into returning to head offices. This pattern is repeating itself in cities across the world as the growth of hybrid working reduces the need for space, with many terminating long-term office leases.
But how different things look in the suburbs and further into the countryside. Office real estate is booming here, particularly in former dormitory towns and satellite villages that were once stripped of residents during the working week due to the gravitational pull of cities.
The picture in the UK is reflected across the world, including in the US where our research shows a quarter of workers have moved further from the city centre, with 80% of those planning to stay in non-city locations.
This leads to a fundamental change in how companies are using space and driving new opportunities for property owners in out-of-city locations, thanks to the natural corollary between the decline of interest in city-centre properties and the fast-accelerating boom for owners of commercial buildings elsewhere.
It’s also driving change in how we operate at IWG. We’re now aiming to have a centre within reach of every meaningful town, village and suburb in the world, partnering with owners that already have buildings and are looking for new ways to monetise their assets. As a result, 90% of our latest locations are in the suburbs and this is just the beginning.
Two routes are available for property owners looking to capitalise on this. Under a franchise operation, where the owner operates their building using third-party branding and sales support or under a managed partnership where the third-party fully operates the centre on the owner’s behalf.
Centres don’t have to be in existing office buildings. For example, a once struggling retail area in a former Royal Mail sorting office in Birmingham is now a 50,000 sq ft Spaces location which is successfully monetising the property for its owners.
There are similar stories to tell across the world, in the US, Philippines, Brazil and many others. In these places landlords are fast monetising their assets to help upend the long-established city-centric approach to life and work.
With people working locally, local economies will receive a boost, work/life balance will improve, carbon emissions will fall, and local communities will thrive as investment floods in. Key to this is turning empty, underused or under-performing buildings into thriving flexible workspaces. For building owners faced with dwindling occupancy, this is an amazing opportunity to turn the numbers around while playing a key role in this world-changing transformation.”
Thomas Sinclair is group chief development officer at IWG Group