Meta’s decision to buy out the remaining term of its lease at Triton Square has given rise to the expected chorus of “the death of the office”. This comes not much more than two years after we last heard that chorus, as the pandemic took hold and forced us all to work from home.
However, these fears are somewhat exaggerated, and we ought not to be too downbeat about the office market in London or the future of the City. Whilst there are undoubtedly challenges ahead in the office sector, it is important to take a step back and look at the real estate market as a whole.
Challenging market conditions bring opportunities. Those in the office sector who steadfastly stick to what they have always done are unlikely to prosper. In sharp contrast, developers and investors who have been looking closely at their product as well as considering alternative sectors will be best placed to seize the opportunities.
Diversification has become the buzzword for commercial developers. While one sector struggles, others continue to outperform the market. Life sciences is still one of the most sought-after alternative uses for those involved with commercial real estate. And while the increase in the cost of finance last Autumn saw a slow-down in what had been a rampant market for logistics in recent years, now that interest rates having hopefully reached their peak, we are likely to see increased activity towards the end of this year in this sector. We are also seeing widespread changes of use to residential with the build-to-rent and student accommodation markets both growing fast.
There can be a real attraction to what often look like exciting new sectors, it is important to say that the London office market is far from dead. The early pandemic predictions from some quarters that everyone would be working from home have proved to be way off the mark.
In the case of Meta, it has been widely reported that the company is laying off thousands of employees globally and so will obviously need less space. With some notable exceptions, the majority of businesses in London are fully committed to the return to the office and working out exactly what the new normal looks like for them. This includes a review of how they use their offices and what adaptations will be needed to provide spaces that suit modern ways of working.
There is a demand and expectation for a hybrid approach going forward, and this can bring with it difficulties around the messaging to employees. However, the office will remain the main place of work for most of us and the overwhelming response to the many surveys on hybrid working report a desire for social interaction as the main reason employees want to come into the office.
Just this week Horizon 22 opened, which now beats the Shard as the tallest viewpoint in London, hot on the heels of the viewing platform at its slightly smaller neighbour, 8 Bishopsgate, which opened last month. Reports suggest that the offices in these two landmark developments, amounting to a total of something in the region of two-million square feet, are already 85% let or under offer.
This shows that the modern office is very much alive and kicking but the re-born version is a flexible, hybrid-friendly workspace with amenity and a sense of place.
In summary, it is important that we take stock, consider the facts and not let an announcement like Meta’s spell the end of the world as we know it. We’ve had far too many similar announcements in recent years and, as can be seen, the facts simply don’t support the headlines.