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I have to say, my optimism in the future of Uk commercial offices has become rather soggy to say the least.
The news that Brookfield has placed its trophy asset at CityPoint in the City of London on the market with a rumoured asking price of around £500 million, having purchased it for some £600 million in 2016 and allegedly the recipient of a valuation of around £670 million as recently as 2023, is a sure sign of sogginess if ever there was one.
Apparently Brookfield, seen as one of the smarter operators in recent years, has walked away from office assets in the US where loans due could not be refinanced, and so the sale of CityPoint can only be seen as a last gasp attempt to save the residual rump of £40 million or so of equity that theoretically still exists. That doesn’t make for a strong bargaining position I would say but what do I know?
I don’t need to point out to you dear reader that this is not only bad news for Brookfield, but bad news for the country as a whole in almost all respects. Exactly the opposite of the ‘growth agenda’ that this country so desperately needs and our new government promises that it will stimulate.
London it now seems, has an office occupancy rate that is now lower than New York, and, would you believe it, Paris. Heaven help us.
Bosses are stuck between a rock and a hard place. Anecdotally, no one really believes the surveys that say that productivity is holding up in this new work from home environment, but to order their staff back to the office runs the gauntlet of a disenfranchised workforce and the bosses would then have to turn up too!
The grapevine tells me that much of the civil service are still ‘non-attendees’ these days. You wouldcertainly believe that if you have, like me, tried to call them recently. Apparently, in the Cabinet Office, bosses made the monumental error (in my humble opinion of course) of asking employees if they wanted to come to the office or work from home! I ask you! As servants of the people, whose side are they on? Check who might hear you before you answer that out loud.
The tension is palpable and there are some fascinating differences of opinion. PWC have apparently demanded their employees return to the office three days a week, whilst their direct competitor Deloitte still apparently allows their employees a free choice on work location. I guess the truth about productivity and returns will come out in the end, for it surely cannot be sustainable that these rivals have opposite opinions on something so important as their business model. It is extraordinary that it is ‘news’ these days that companies are demanding their employees come back three days a week as several have done recently.
It still seems to be a cat and mouse game and right now but I judge that the mice are still winning. That isclearly not optimum for those invested in UK offices, (nor of course for New York, Boston, San Francisco and Paris in example when the same tensions exist).
Our new prime minister, arguably the ultimate boss, is apparently setting everyone up for ‘painful’ decisions in October. We can all guess what that means (Property Chronicle readers especially beware) but surely the best ‘painful’ decision that he could make that might actually be in the best long term economic interests of the country, would be to tell everyone that they must go back to their place of work. I had dinner with an Australian CEO last week and he is requiring 5 day a week attendance, and I gather that this message is circulating openly in Australia right now. My optimism that this advice will reach the ears that need to hear in the UK though, given that it is the civil servants that fill the red boxes at night, is also rather soggy.
We really need some economic literacy from our government. They appear to understand that there is a multiplier effect that comes from delivering new housing, but it would be helpful if they also understood that employees turning up to work, like in the good old days, might be a prerequisite for their growth agenda. To say nothing of putting a bid under offices. The proposed new UK employment laws proposing a de facto right to flexible working from day 1 for employees is an Olympic sized leap in the wrong direction. Would anyone take the other side of a bet with me that we will see a commercial property related credit event in 2025/6?
