Why London could be one of Europe’s least resilient office markets

London is likely to be among Europe’s least resilient office markets in the face of changes following the Covid-19 pandemic, according to new research. Analysts at asset manager AEW have ranked 25 city office markets across Europe according to how resilient they will be to a rise in office-based employees working from home in the wake of the coronavirus crisis. Of the 25, London ranked 19th, ahead of only Frankfurt, Brussels, Dublin, Budapest, Warsaw and Prague. The most resilient markets were Marseille, Vienna, Copenhagen, Utrecht and Lyon. Across all of the cities, AEW expects 37% of workers to be working sometimes or usually from home in 2024, with a high of 45% in London and Dublin and a low of 33% in Copenhagen. AEW ranked each market on five supply and demand metrics and then gave each an overall rank. The individual metrics were: expected growth in office employment between now and 2025 office vacancy rate as of the final quarter of 2020 projected office stock growth over 2021-25 office worker cost efficiency, measured as an employee’s “gross value added” divided by occupational costs office demand elasticity, or the historical ratio between change in office employment and occupied stock between 2003 and 2020. As the market showing the least elasticity, London was the league table topper for resilience by that metric – AEW assumes that the markets where occupied office stock is more sensitive to employment trends will prove less resilient. London also scored highly for net office stock additions, with a limited supply meaning a less pronounced impact from a rise in homeworking. However, those scores were more than offset by some of the lowest rankings for vacancy rate and office worker cost efficiency. AEW said London and Paris both “remain vulnerable due to their very high occupancy costs per employee”. To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette Photo © Valentin Wolf/imageBROKER/Shutterstock