An increase in the number of people working from home following the Covid-19 pandemic has seen demand for office space in London slump.
According to property website Rightmove and data firm EG, the number of enquiries for office space in the capital has fallen 11% year on year between 2022 and 2023.
Lockdowns are partially responsible, with many companies adopting hybrid and fully remote working environments, the pair noted.
“The way we work has been one of the biggest changes to come out of the pandemic, with flexible, hybrid or even completely remote working becoming the norm,” Rightmove said.
“Companies are increasingly assessing the size of the location they need and the flexibility of their arrangements in order to best fit the needs of the modern workforce.”
HSBC Holdings PLC (LSE:HSBA) announced it was downsizing from its Canary Wharf headquarters last month, citing an increase in home working as reason for a move to smaller offices in the City of London.
However, a strengthening of rules on energy efficiency has also begun to bite landlords, with new rules in April preventing some buildings from being rented out at all.
This has left 8% of London’s commercial property illegal to rent out, according to financial services company BNP Paribas, given energy efficiency ratings must be above an ‘E’ currently.
More buildings are set to be hit in the future too, with some 43% of London’s buildings rated ‘D’ and ‘E,’ meaning they will need retrofitting to meet rules due to be introduced in 2027.