Thought of the Week
The occupancy challenge: Still a long way to go
March 27, 2025 4 Minute Read
In a recent Thought of the Week, we noted that occupancy levels are improving across Europe and the rest of the world. While it is encouraging to see average office occupancy levels increase, they still fall short of employer expectations.
CBRE’s European Office Occupier Sentiment Survey 2024 indeed reports a gap between attendance levels and employer expectations (for the number of days spent in the office). For example, while 46% of respondents reported employees were attending the office just one or two days per week, this level of attendance was desired by only 18% of employers. CBRE’s recent Global Workplace & Occupancy Insights series found that 61% of leaders surveyed responded that employees were in the office less than expected.
The push towards a return to work has been slower than anticipated. According to a 2021 survey by Willis Towers Watson, employers thought that by the end of 2024, 43% of employees would be back in the office the majority of the time, but they report the actual figure was just 34%.
To hasten the pace of people returning to work, employers are increasingly turning to attendance mandates. President Trump added impetus to this trend with his Executive Order requiring federal government employees back into the office on a full-time basis. However, many private sector employers were already moving in this direction. We can expect many U.S.-domiciled companies to apply their in-office mandates to their UK and European operations as well.
However, some employers are finding that back to work mandates are easier said than done. In many cases, employees are reluctant to return to the office. Some surveys indicate that workers would rather resign from their jobs than return to the office, although it appears that that some companies are using mandates as a pretext to dismiss unproductive workers. But even if this is not the case, some companies are encountering practical challenges. One of the main issues is the physical space constraint, as some companies do not have the space to accommodate all their employees at once.
Through a combination of factors, including the rightsizing of offices by many occupiers, the aggregate sum of occupied office space has not kept up with the rate of increase in office-based employment. Taking the example of Central London specifically, between the end of 2019 and 2024, the number of people employed in office jobs has increased by an estimated 334,000 jobs (2.4%), whereas the total occupied office space has fallen by 2.9m sq ft (1.3%) over the same period. Put another way, in Central London in 2019, each person had 108 sq ft of office space to work in. By the end of 2024, this had fallen to 91 sq ft.
In order to rightsize back to 2019 levels (even assuming zero headcount growth), London corporates will have to acquire 39m sq ft more office space. For context, the gross annual average take-up in Central London is 11.7m sq ft. Year-on-year net absorption has never been higher than 7.21m sq ft in any 12-month period on record.
Five years on from the pandemic, office occupation still clearly has not stabilised and appears to be a long-term issue.
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