Offices are empty – but they’re not doomed
The sudden shift to working from home has left some 75% of office buildings empty. But reports of the commercial property sector's death may be premature.
![Businessman on an empty street in the City © Jason Alden/Bloomberg via Getty Images](https://cdn.mos.cms.futurecdn.net/YVHDfja2VFJPhgt4BZGzPF-415-80.jpg)
“Once-bustling European office blocks resemble ghost towns,” says Aimee Donnellan on Breakingviews: some 75% of buildings are empty. And this sudden shift to working from home that’s been forced on employers by the Covid-19 lockdowns “has created a new reality in the office rentals market”. In the UK, the “old standard of ten-year leases” – with rents that were only adjusted upwards – “has been abandoned”: new leases are for as little as three years.
Now companies such as accountants PwC, social-media network Twitter and asset manager Schroders “are suggesting that this is set to be far more than a down cycle in rents”. They predict “a new era in which working from home is standard”, meaning lower long-term demand for offices. But that may be a leap too far. “Lower rents don’t necessarily presage a property revolution”.
Quite, says Nils Pratley in The Guardian. It’s too early to conclude that productivity will be the same when everybody is working from home in more normal times. Or that stay-at-home employees will feel sure that they are being noticed for promotion if they are not under their manager’s eye. Before deciding the office is dead, “let’s see what happens when the novelty wears off”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
![https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg](https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748-320-80.jpg)
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
So it’s striking how much pessimism “is already baked into share prices” for property firms, says Bryce Elder in the Financial Times. In the UK, Land Securities and British Land are down by more than 40% this year. “Deciding whether these moves are overreactions demands considerable guesswork”, but so far demand for prime office space in London remains resilient – not least because firms need to be able to space staff out until a vaccine arrives.
With these stocks at such steep discounts, any private-equity funds that don’t share the “doomsday views” about the sector “are highly likely to be taking an interest” in them.
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.
Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.
He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.
-
Tesla and Alphabet announce results – should you invest in Big Tech?
How profitable are the world’s biggest tech companies? We share the latest so far this earnings season.
By Katie Williams Published
-
How working part-time in retirement could boost your pension by £87,000
Easing into retirement by working a few days a week could add thousands to your pension pot. We crunch the figures to see how working part-time can boost your pension po
By Ruth Emery Published
-
UK mid-caps: an improving outlook
UK mid-caps have perked up and the rally may run further, but long-term investors should remain selective
By Cris Sholto Heaton Published
-
The tobacco industry is going smoke-free - how to profit from it
Tobacco companies have realised their traditional products are on the wane. But new opportunities have opened up – and should prove lucrative
By Rupert Hargreaves Published
-
Is it time to invest in creative industries?
Any industrial strategy should not overlook the creative industries, one of our top national assets
By David C. Stevenson Published
-
Is Mercia Asset Management set for success?
Mercia Asset Management helps the government fund smaller companies in Britain’s regions. Should you invest?
By Rupert Hargreaves Published
-
British stocks set for a boost
British stocks are due for a bounce as the UK looks more stable compared to many economies
By Alex Rankine Published
-
Ocado shares jump by a fifth
Ocado takes a turn for the better after attractive profit forecasts were announced
By Dr Matthew Partridge Published
-
The AI boom is on borrowed time
The hype around the AI boom could be on its way out – but why?
By Alex Rankine Published
-
Diploma: a blue-chip set for strong growth
Diploma, whose niche products include seals and fasteners, serves an array of growth markets. Should you invest?
By Dr Mike Tubbs Published