How Did Working From Home Affect The Office Rental Market?

During the Covid 19 Pandemic, employees were encouraged to work from home instead of coming into the office. This meant that these offices were either largely or entirely empty, so now we ask the question: are offices being used again, or is there a massive marketplace of unused office space available?

If so, and if all the workers are staying at home, who on earth would even buy it? Read on to find out….

How Hard Did The Market Crash?

In June 2019, just before the Covid-19 pandemic started, the UK’s all-property average capital value growth was at a decline of -3%. 1 year later in June 2020, at the height of the UK’s first lockdown and with the majority of companies effectively closed for business, the value growth had dropped to an all-time pandemic low of -10%, a further decline of 7%. 

This decline in the market was the direct result of the Covid pandemic outbreak and initial shutdowns and business restrictions, as many small businesses were forced to shut down as they could not transfer online, and others got rid of their disused offices or simply took the cost of the office, even with its greatly decreased usability. 

With many businesses going bankrupt or cancelling their office leases, things looked bad for the commercial estate agency world for quite a while. But since we’ve mostly returned to ‘normal’, say from mid-2021 onwards, what UK and worldwide trends can we see?

Workers Returned To The Office 

Despite, according to UK Government sources, 45% of the UK workforce working from home during the Pandemic, many commentators and property specialists correctly predicted that the majority of employees would be forced back into the office post-pandemic, which is exactly what happened. 

Despite a perhaps not surprising 84% of UK workers wanting to keep their pandemic work-at-home arrangements post-pandemic, most companies began expecting their staff to show back up at the office again once the lockdowns and heavy restrictions began to ease.

Quarter by quarter, since lockdown truly ended in 2021, the UK’s property market has been recovering well, and it’s not just in the UK either, in the US we can see that many large US companies are buying more office space too, such as Facebook leasing 300,000 sq ft of office space, and Google spending $2.1bn on new office buildings, while Twitter issued an ‘end to working from home’ mandate to all their staff fairly recently.

Market Recovery

After the all-time pandemic drop of -10% commercial UK price drop of June 2020, the market rebounded, and by December 2020 the all-property average capital value growth had grown to only -2%, an 8% increase from the summer, and reflective of the nation’s mood as we began to move out of lockdown and see the constrictions lifted.

This further improved continuing into 2021 with the capital value growth rising to 2% in Q1 March 2021, an increase of 4% compared to the previous quarter and its highest in 3 years. Then, it continued to rise in Q2 June 2021 to a 6-year high of 9% capital value growth, an increase of 7% to the previous month, with a forecast of continual growth within the commercial property sector across the UK.

Written by Stephen Taylor Propaganda

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