Unprecedented Surge in London Office Job Opportunities Marks a 3-Decade High

LONDON — London’s office market is currently facing a “rental recession,” according to financial services company Jeffries. They reported that the vacancies in the capital’s business hub have reached a 30-year high. 

Jeffries analysts estimated that there has been a 20% decline in London office usage due to the rise of remote and hybrid work arrangements, as well as a growing preference for sustainable office spaces.

They also noted that the current level of vacancies is higher than the threshold at which rents typically start to decrease, except for sustainability-focused buildings.

Jeffries added that flexible, co-working, and serviced offices now occupy approximately 9% of London’s office space, taking up some of the vacant areas.

In their report, Jeffries downgraded commercial real estate companies British Land Company and Great Portland Estates due to their projections of the market continuing to contract. 

London-based office spaces have been abandoned by many major companies. Meta, for example, recently paid £149 million ($181 million) to terminate their lease on an office space in Regent’s Place ahead of schedule, as reported by British Land on Tuesday. HSBC, a British bank, also announced in June that it would be relocating from its 45-floor Canary Wharf tower to a smaller space in central London, as reported by Reuters.

However, Morgan Stanley has taken a different stance by upgrading the stock of Great Portland Estates. They believe that U.K. real estate investment trusts present a compelling opportunity.

Morgan Stanley explained that this sector tends to perform well toward the end of economic downturns, and they expect net asset value declines to stabilize soon. They also anticipate rate cuts by the Bank of England, which further supports their positive outlook on the sector.

Shares of Great Portland Estates dropped nearly 4% around midday on Wednesday, while British Land Company declined by 2%.