A fifth of office space could be redundant within five years

Almost a fifth of office space will no longer be in use by the end of 2025 as nearly half of businesses look to “remodel” working practices to accommodate working from home, according to new research by risk management and insurance broker Gallagher.

The change has largely been triggered by the COVID-19 pandemic and suggests remote working could become a regular feature of life in years to come.

The study, which surveyed 1000 business leaders, found that 45 per cent of businesses with office space intend to downsize by the end of 2025, with one in seven having already made the alteration since the start of the pandemic.

Although the majority of companies plan to keep at least some office space, the figures mean an estimated 18 million square feet of all current office space (18 per cent) will become redundant in the next five years, saving company’s more than £45,000 in rent each year.

This would dramatically change the look of city centres and could put pressure on commercial landlords who are facing reduced portfolio values if demand drops.

However, this may be offset by previously high demand for city-based office lets, which were oversubscribed pre-pandemic.

Instead, businesses will seek out shorter, flexible leases on offices with more space for collaborative working.

Gallagher’s findings also suggest that the five-day office working week will become a thing of the past.

While only 5 per cent of people worked from home prior to the pandemic, more than two-thirds of businesses have made or are planning to make changes to their working from home policy.

That includes more than a third who have already implemented changes.

Commenting on the findings, Jon Phillips, real estate managing director at Gallagher said: “The restrictions on office-based working due to COVID-19 have made businesses rethink the space they need.

“The majority of businesses interviewed planned to keep some kind of space, but the role of the office is changing, with time in the workspace mainly spent collaborating or attending meetings.

“Clearly, many businesses will continue to need space for storage of equipment and the housing of IT.

“However, we are seeing a long-term sea change in terms of employee attendance five days a week.”

Words by Will Hardy