England's office space shrinks during the pandemic

Work-from-home trend sparks 2% contraction in workspace across the country

A worker in an office in London's financial district. Many people will start the year working from home amid government concerns about the spread of the Omicron coronavirus strain. AP
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The amount of office space in England shrank during the Covid-19 pandemic, contracting by more than a million square metres as the work-from-home trend continues amid a surge in the number of infections.

Office space fell 2 per cent in the 12 months to March 31 last year, according to the Valuation Office Agency, which is part of HM Revenue & Customs. The decline represents more than 1.67 million square metres – equal to 35 times the floor space in the Gherkin office building.

With many workspaces either lying empty or dormant, developers are facing increasing pressure to make offices more flexible and environmentally friendly to adapt to new pandemic-induced work patterns and increased environmental regulations.

The office space contraction comes as companies are gearing up for a surge in workplace absences amid the latest surge in Covid-19 cases.

Ministers have been urged to develop “robust contingency plans” to help companies to cope with rising workplace absences, with the government issuing a warning that up to a quarter of staff could be off work as the Omicron variant sweeps through the country.

The UK has hit a record number of daily cases during the festive period, with the transport sector already heavily affected by staff absences along with the NHS.

With those affected by Covid required to isolate for seven days, the issue is particularly affecting industries where staff are unable to work from home.

For office-based companies, however, encouraging staff to come into work has become more of a challenge amid the Omicron surge, in turn causing a headache for developers with office space occupancy levels falling to 10 per cent in England in the week before Christmas when the government urged people to work from home if possible.

Property experts said the amount of empty office space would have fallen even further since March as employers look to a future of more flexible workspaces, with staff coming in on a rotation basis and, in turn, requiring less physical space.

Mat Oakley, head of European commercial property research at consultancy Savills, told the Financial Times that the UK will not need as much office space in the future “if high levels of agile working remain”.

Mr Oakley expects the flexible work trend to persist beyond the pandemic, making up to one in 10 offices surplus to requirements within five years – making older buildings that fail to meet stricter environmental standards redundant.

“Some stock is no longer fit for purpose,” he said.

As 2022 begins, CBI chief economist Rain Newton-Smith said businesses stand ready to work with the government to lift confidence. Clear forward guidance for companies will be crucial to protect jobs and growth.

“But if infection and hospitalisation rates continue to grow across the country, the potential of further measures will weigh on firms,” said Ms Newton-Smith said.

“The government must monitor the situation closely and ensure that any new restrictions go in lock-step with further targeted cash-flow support to those firms most in distress across sectors [affected].”

Meanwhile, the late payment of invoices is threatening the survival of small companies, according to the Federation of Small Businesses (FSB). It fears that late payments, high inflation and mounting administration costs for businesses that trade internationally could cause numbers to shrink if something is not done about these issues.

Of the 1,271 small businesses owners interviewed in an FSB study, 30 per cent said late payment of invoices had increased over the last three months while a further 8 per cent said they were dealing with other ways in which they were not being paid on time.

"The small business community diminished in size over the past year and, unless action is taken now to tackle the challenges it faces, history is set to repeat itself," FSB national chairman Mike Cherry said.

Up to 440,000 could be forced to close this year due to late payment alone, according to the FSB study.

Updated: January 03, 2022, 10:58 AM