Goliaths in the office space sector have taken their first hit as the value of their property portfolios has dropped.
The value of the largest serviced office providers’ estates have fallen to £24.3bn from £25.7bn in the previous year, according to law firm Boodle Hatfield.
Since 2017, the value of office space providers has leaped more than 300 per cent, up from just £5.9bn five years ago.
The advent of working from home requirements during the pandemic saw demand for space plummet, with many businesses unable to keep their heads above water.
The £1.4bn drop is largely down to serviced office operators divesting of long leasehold property, Boodle Hatfield suggested.
Companies to be hammered by the pandemic include sector titan WeWork, which debuted on the New York Stock Exchange with a $9bn valuation upon listing last autumn.
More than 150 WeWork sites have been closed since the start of the pandemic in an attempt to downsize and cut the beleaguered firm’s losses.
However, the industry has now reached “a consensus that a hybrid working model will see the sector continue to grow,” David Rawlence, associate at Boodle Hatfield said:.
He added: “The UK’s tech sector, which have been major users of serviced offices, has come out of the pandemic in an even healthier state than before Covid.”
What’s more, big office occupiers have adopted a fresh appreciation for “having the option to increase and decrease” their space, Rawlence explained.
Electronics retailer Currys has revealed it is closing its HQ in favour of enabling employers to work from around 50 UK WeWork locations.
“We expect to see more traditional office landlords expand their own serviced office arms – such as British Land’s Storey brand. As well as more new entries to the market we are seeing consolidation amongst existing players as they seek to rapidly scale up,” Rawlence added.