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Out of office – how the pandemic has changed the face of British high streets

5 min read

Exclusive analysis by The House reveals how the pandemic has accelerated a leap in office vacancies in London and the Home Counties. What impact will the trend have on our high streets – and the future of work?

The number of vacant offices has jumped in parts of London and the Home Counties since the start of the pandemic, with vacancy rates topping 30 per cent in some areas, according to new data. Of 26 local authority areas that have seen office vacancy rates rise by at least five per cent since March 2020, 16 are in the London hinterland.

In general across England, the rise in office vacancies since the pandemic continues a pre-existing trend, with office vacancy rates rising by an average of four percentage points since March 2018 and two percentage points since March 2020 – figures that mask substantial geographical differences.

But in some of the most significantly-affected localities, the increase seems to have been sparked by the pandemic itself.

The data was collated by the commercial location database openLocal from figures published by, or requested from, local authorities in England, and has then been analysed by The House.

The figures reinforce reports of rising office vacancies in the South East since the pandemic sparked a shift to working-from-home.

However, despite warnings of the “death of the High Street,” retail unit vacancies appear to be lower than office vacancies in both raw levels and rates of increase.

The figures show 35 per cent of office units are vacant in Richmond in south west London – a rise of 10 percentage points since March 2020 and 16 percentage points since March 2018. The fastest rise since March 2020 is 15 percentage points in Tower Hamlets – where vacancy rates were largely static before the pandemic – while the data shows vacancy rates in Watford have risen 14 percentage points since March 2020 and 24 percentage points since March 2018.

Figures for specific councils are subject to potential inaccuracies in the data reported by individual local authorities, but the pattern averaged out across regions is similar – higher vacancy rates in offices rising faster than for industrial and retail units, with the biggest increases since 2018 in Greater London, the South East and East Anglia.

Office vacancies have also risen in the North East, although this is averaged out across a relatively small number of local authorities.

Ant Breach, a researcher for the Centre for Cities think tank, said the long-term decline in demand for office space is driving the trend towards “permitted developments” that convert offices into flats.

“Before the pandemic, there was a broader problem where we had a real mismatch of medium to low quality office space,” he told The House. “One of the factors that was driving [permitted development conversions], why [the government] did those reforms in the first place, was because there was just way too much office space outside of areas in which there was high demand for office space.”

He added that while demand for city centre offices may return, the outlook is worse for the more peripheral out-of-town business park office space that sprung up in the 1980s.

“One factor that we’ve seen over the past 20, 30, 40 years, is that city centres have become much more important for highly skilled, knowledge intensive office-based work. And that’s helped lead a renaissance in our big cities.

“But one of the consequences of that is that there has been over time relatively less demand for business park office space of the kind that we really saw kick off in the 1980s.

“There are some of these business parks that are going to be close to amenities, close to infrastructure, close to schools – those sites might be more suitable to turn into housing… In other places, it will be a conversion to more logistics and light industrial space, especially if it’s near transport infrastructure like motorway junctions.”

Pushing back by enforcing rules may smother urban renewal and lead to exactly the sort of empty shops and offices councils don’t want

The figures show more modest rises in retail vacancy rates – two percentage points on average across England since March 2018, and one percentage point since March 2020. The highest increase since 2018 is eight percentage points in nearly four years in Hambleton, North Yorkshire. Gavin Chait, data scientist and founder of openLocal, suggested this was because, while shops might be pulling out of high streets, retail activity is often simply displacing elsewhere – sometimes close to the newly vacated sites.

“We’ve run cluster analysis on retail activity, drawing boundaries around the definition originally used to estimate the official high street definitions to assess how high streets have changed over time,” he said. “What we’re seeing is that these clusters are fragmenting. There are more ‘high streets’ clusters distributed within local authorities while the original high street fragments or atomises.

“The high street definitions and boundaries of a generation ago do not reflect the changing nature of work. This was true five years ago and is dramatically true as a result of Covid. People want to commute less and live more. All business will respond to that, leaving behind empty shops, with offices converted to homes, or reconfiguring previously underutilised retail areas on the periphery of these original high streets.

“Pushing back by enforcing rules may smother urban renewal and lead to exactly the sort of empty shops and offices councils don’t want.

“However, government needs to recognise the impact from loss of rates collection. Commercial rates are an important part of council income. Most businesses are too small to pay rates, and so councils rely on their few ‘whales’ to support everyone else. When offices shrink, those anchor ratepayers vanish and councils will struggle.”

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