Demand for premium office space in cities like London and Paris is rising as more companies order staff back to the office and as property developers take advantage of changes to permitted development rights, with regards to converting large offices into residential.

Many businesses are rolling out stricter return-to-office mandates, including JPMorgan and Amazon, while others, like UBS and Deutsche Bank have told staff not to work from home on both Friday
and Monday.

These changes are resulting in falling vacancy rates and record office rents in prime locations like central London. Lee Elliott, global head of occupier research at Knight Frank, stated: “The pendulum has swung...we’ve got pent up demand, and then we’ve got a shorter level of supply, particularly quality supply.”

The office vacancy rate in central London fell to 7.1% in March, according to Savills, down from a post-pandemic peak of 8.7% and the lowest since 2020, but higher than the roughly 5% level in
pre-pandemic 2019.

The largest provider of flexible workspace in the UK is IWG (International Workplace Group), which operates under various brands like Regus, Spaces, HQ, and The Clubhouse. So far this year, the company’s share price has increased by more than 40%, from 160 to 225 at the time of writing.

London office take-up soars
In its latest Q2 London office market report, Colliers reported that quarterly take-up across London in the second quarter of this year reached 3.2m sq ft, which is 17% above the 10-year quarterly average. That represents a quarterly rise of 29%, in part, generated by a significant number of 100,000 sq ft plus transactions.