More than 10 million sq ft of rateable office space disappeared in England and Wales in the year before the coronavirus pandemic hit, according to new research.
Exclusive analysis obtained by Property Week from Search Acumen shows that the amount of contracted office space as of 31 March 2020 fell to 946 million sq ft from 957 million sq ft at the same point the year before.
Search Acumen analysed data from the Valuation Office Agency and found the gradual adoption of working from home practices was already taking place as the pandemic took hold over the UK.
Findings show that the fall in office space over the last year marked a sixth successive year of decreasing office space, following almost a decade of expansion between 2005 and 2014.
Broxbourne, Nottinghamshire experienced the biggest fall in office space in the last year – contract office space decreased by over 16%, down to 645,000 sq ft in financial year 2019/20 from 775,000 sq ft in 2018/19.
Whereas the borough of Newham in London saw a 38% in office space take-up; up to 3.6m sq ft in the financial year 2019/20 from 2.59 sq ft in 2018/19.
Caroline Robinson, commercial real estate business development manager at Search Acumen, said: “This research reveals that a sustained decline in demand for physical office space was underway even before the onset of Covid.
“The contraction of office space is likely to accelerate in the coming years, triggered by firms assessing the necessity of their real estate footprint after large swathes of the workforce have effectively adapted to work-from-home practices.
“While the need for office spaces has not completely disappeared, commercial real estate investors need to incorporate the likelihood of lower occupancy rates into their risk assessments. Rents in the office sector are likely to fall further due to decreased demand from potential commercial tenants and existing tenants attempting to restructure leases to better align their cost base, which will put downward pressure on yields.”