Is the Office Market Slowing or Waiting?
What: Analysis of the serviced office market cooling down.
Why: Seasonal variance and prolonged lack of certainty.
What next: The demand to provide employees with a premium working environment will grow exponentially.
In May 2021, Uncommon sold a record number of workstations – our biggest month in the history of our 5-Year-old business. This was a major signal that many business leaders were making serious commitments to providing their teams with a premium working environment. Ultimately, they could see the light at the end of the tunnel of (what has felt like) the never-ending pandemic.
There was certainly a large increase in demand in the market on the back of Boris’ positive announcement on the 12th April.
Many decision makers and business owners mentioned during tours and deal negotiation that they found it difficult to directly ask their staff back into the workplace. They stated that they were ready and needed their teams to come back into the office several months ago, as they could see productivity and company culture dropping.
There was even mention in 2020 that the longer the pandemic went on for, the more challenging the economic climate would become. Thus, businesses would be forced to focus on securing lower quality and lower priced options on their return to the office, which of course would make it more difficult for office space providers at the higher specification end of the market.
Yet interestingly, demand is increasing, employers are using more premium office options as a way to persuade their teams back into the workplace (as well as attracting new high-calibre talent). What went before was not good enough and staff (rightfully) are demanding better environments.
Companies taking smaller spaces than pre-pandemic is another potential factor that has played into this demand spike. Some as little as 50% of either their team size or previous office space – as they will now be rotating the teams (each employee spending just 2-3 days per week in the office). This has in turn provided a larger budget to spend on a smaller yet more premium space.
This is backed up with the Deloitte’s Summer 2021 London Office Crane Survey — a barometer of business and developer sentiment.
“The office is arguably undergoing its most disruptive shift in recent times, as it evolves and adapts to the new ways of working that suit the modern post-COVID workforce. As employers look to lure their workers back to the office, they are likely to sharpen their focus on best-in-class office accommodation, with ESG and wellbeing credentials.”
The survey also suggests that the office building is likely to become a space to promote and support the wellbeing of employees, many of whom have experienced isolation during the lockdown period as well as challenging/sub-optimal working conditions.
So where am I going with this? On the back of the mammoth May, June sales started to slow down. And while a very strong month of sales, this is somewhat lower than the month before. Is this because the market is cooling down?
Below, I discuss 3 factors which I feel may have contributed to a drop in deals and a slight cooling of the market.
Typically we find fewer businesses moving offices during the summer holidays, which essentially eliminates the period between June and August. At this time of year, people do not want to add the logistics of moving to an already hectic holiday season filled with high levels of employee annual leave, school holidays, and family obligations.
Uncertainty in the media and talk of a 3rd wave of lockdowns
Are we seeing a cooling of the market due to a negative recurring narrative in the press such as the following;
- The UK reopening date pushed back from 21st June to 19th July.
- The Delta variant.
- Likelihood of another wave in the Winter.
Perhaps these themes are providing enough doubt that business leaders are pausing their searches or decisions until later in the year.
Naturally, after our record month and spiked increase in occupancy, this has meant we have fewer offices available, which in turn means there are fewer offices to attract clients in for viewings.
Ultimately, only time will tell if the market is slowing or waiting for huge end to the year and for what reasons. I am certain that our long term demand is increasing and the types of tenants taking space is always growing, as client’s workforce demand a better environment. We see this in the abundance of positivity in our spaces, which is seen especially through the hustle and bustle and member interaction in all four Uncommon café break-out spaces, which is a pleasure to see.
Written by Anil Kataria, Sales Manager at Uncommon. If you’d like to discuss your office requirements or anything else at all, you can reach Anil and the Sales Team here.