By Iain Withers<\/p>\n
LONDON (Reuters) -Demand for premium office space in cities like London and Paris is heating up as more companies order staff back to the office, but investment is lagging and could worsen a supply crunch, property sources said.<\/p>\n
Many businesses are rolling out stricter return-to-office mandates, including JPMorgan, Amazon and Royal Bank of Canada. Others like UBS and Deutsche Bank have told staff not to work both Fridays and Mondays from home.<\/p>\n
The trend is reflected in falling vacancy rates and record office rents in prime locations such as central London.<\/p>\n
Yet investors remain reluctant to buy properties or commit to building new ones due to uncertain pricing and high borrowing costs.<\/p>\n
“The pendulum has swung… We’ve got pent up demand, and then we’ve got a shorter level of supply, particularly quality supply,” said Lee Elliott at property agency Knight Frank.<\/p>\n
The office vacancy rate in central London fell to 7.1% in March, according to agency Savills, down from a post-pandemic peak of 8.7% and the lowest since 2020, but higher than the roughly 5% level in pre-pandemic 2019.<\/p>\n
Average prime rents in the central City and West End districts were at near-record levels in March, Savills data shows.<\/p>\n
However, the picture is less rosy outside the centre. The vacancy rate across London as a whole rose to 10.9% in the first quarter, according to CoStar data, the highest in more than 20 years, as occupiers shunned older, out-of-town properties.<\/p>\n
The mixed picture is weighing on investment. Office sales in Europe last year slumped to their lowest level since 2009, while transactions fell 18% year-on-year in the first quarter, according to MSCI data.<\/p>\n
In London, only about 4 million square feet of new office space is planned to complete in 2027 and 2028 – less than was delivered in 2025 alone, according to Deloitte.<\/p>\n
Planned London office sales by Brookfield and Nuveen were shelved this year after bids fell short of expectations, although there are signs of improved appetite for some trophy assets – Blackstone is among bidders for a Paris office block with a price tag of 700 million euros ($812 million).<\/p>\n
Some companies are also cooling on the downsizing trend, with just 21% of occupiers looking to cut space in a recent Knight Frank survey – the lowest level in seven years.<\/p>\n
HSBC is moving its headquarters in London to a building roughly half the size, but has realised it will lack sufficient space and is assessing other options including retaining smaller offices elsewhere in London, a source familiar said.<\/p>\n
An HSBC spokesperson declined to comment on its options.<\/p>\n
With limited new supply, improving demand could ultimately benefit second-hand office space.<\/p>\n
Around 30 large companies are each looking to lease more than 100,000 square feet of office space in London – equivalent in total to at least 40 soccer pitches – according to Kevin Darvishi, leasing director at office developer Stanhope.<\/p>\n
“Frankly there will not be enough space…for even half those occupiers to move,” he said.<\/p>\n
($1 = 0.8624 euros)<\/p>\n
(Reporting by Iain Withers; Editing by Tommy Reggiori Wilkes and Toby Chopra)<\/p>\n","protected":false},"excerpt":{"rendered":"By Iain Withers LONDON (Reuters) -Demand for premium office space in cities like London and Paris is heating…\n","protected":false},"author":2,"featured_media":180667,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7757],"tags":[748,22228,393,4884,56168,257,74346,74347,48928,16,15],"class_list":{"0":"post-180666","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-london","8":"tag-britain","9":"tag-central-london","10":"tag-england","11":"tag-great-britain","12":"tag-knight-frank","13":"tag-london","14":"tag-office-space","15":"tag-record-office-rents","16":"tag-royal-bank-of-canada","17":"tag-uk","18":"tag-united-kingdom"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/114675222093493404","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/180666","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=180666"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/180666\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/180667"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=180666"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=180666"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=180666"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}