London office rates rise prompted by four-day work week

Average office occupancy rates in the West End during the weekdays are close to pre-pandemic levels, and continuing to trump that of the City.

According to new research from Savills, occupancy rates in the area which spans from Oxford Street to Piccadilly Circus have risen to 62 per cent up from 50 per cent in the last six months.

The estate agent said that this can be credited to an increase in demand from finance companies –  excluding insurance – who are recording a 63 per cent average occupancy rate, due to the sector largely favouring a four-days-a-week in the office.

Savills said: “As many organisations in the private equity and investment management space favour West End locations, this has contributed to the district’s rapid increase in occupancy.”

In the City, weekday occupancy levels are continuing to lag behind, sitting at 50 per cent in September up slightly 48 per cent in February and 36 per cent in June.

Andrew Barnes, head of central London tenant representation at Savills explained that the numbers in the West End have shot up faster compared to the City due to its more “diverse occupier mix”.

He said: “When you break London’s average occupancy rates down by sector, finance (excluding Insurance), is second at 63 per cent, and includes a lot of private equity and investment management employees which tend to have strong ‘in the office’ cultures.

“Many companies in these sectors have their homes in the traditional West End strongholds of Mayfair and St James, and their robust demand for prime space continues to apply upward pressure on rents in these prime locations.”

It comes as London has been adapting to a new hybrid working environment, with many employers allowing staff to split their time between work and the office.

However, in recent months, major employers such as Lloyds Bank have been tightening up on their home working policies.

HSBC also last month ordered its 18,500 UK staff back to the office for three days a week.

Rebecca Webb, director of EMEA cross-border tenant advisory at Savills, said: “What is key is how the space is designed to meet the diverse needs of employees, ensuring that they have alternate work settings within the office to suit various tasks throughout the day.

“This therefore places greater importance on the shared spaces of the office which employees are expecting much more from for greater productivity.”

She added: “Demand continues to intensify for well-connected, good-quality office space in mixed-use locations, and amid construction delays and a shortage of prime stock, occupiers will have to compete for the best space, supporting prime rental growth.”