London office vacancies hit 30-year high

Remote and hybrid work are among the factors hurting the sector, according to investment bank Jefferies

The share of empty workspace in London’s main business hubs has hit its highest level in three decades, plunging the UK capital into a ‘rental recession’, investment bank Jefferies reported this week.

The bank’s analysts estimated that there has been a 20% contraction in the city’s office usage due to a post-pandemic hybrid work model and a shift to greener offices in the suburbs.

Flexible, co-working, and serviced offices account for about 9% of London’s space and have moved into some of the vacant facilities, according to the report.

“Retail was technology’s first casualty and we think offices are next. Utilization has shrunk and landlords are losing pricing power as tenants offload surplus space,” analysts said.

In its report, Jeffries downgraded commercial real estate companies British Land Company and Great Portland Estates, warning that the market will continue to shrink.

READ MORE: UK firms shedding staff as recession fears mount

Top financial managers recently raised concerns over London’s future, warning that the UK capital may lose its status as a leading financial center. A poll by Lloyds Bank revealed that 64% of sector leaders believe the City of London will stagnate as a global hub compared to its rivals.

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