Firms Say They Will Reconfigure Existing Office Space Rather Than Relocate To New

More than four times as many UK businesses (45%) are looking to expand their office space in the next 12 to 18 months rather than to reduce it (10%) according to a new survey commissioned by law firm Irwin Mitchell. This shift comes as more workers return to the office to work, prompting many companies to reassess their current space allocations. 64% of those surveyed admit they overshot their downsizing efforts during the Covid era.

Of those planning to expand, 49% said they would do this by reconfiguring their existing premises rather than relocating to entirely new sites (23%). And in a vote for flex, 44% of respondents are considering incorporating flexible workspace options in their property portfolios – perhaps creating the “breathing space” needed as they adapt to evolving operational requirements.

In person office attendance on the up- 74% of businesses expect this to increase in the next 18 months

Organizations are capitalizing on a marked shift in working habits. Over the past year, 72% of employers have noted an increase in office attendance, with 74% predicting further growth in the next 12 to 18 months. This trend is particularly pronounced in London, where 81% of businesses expect higher in-office numbers, and in the North West, where 71% forecast a similar rise.

The survey also reveals a decisive tilt towards more days expected in the office.   While 45% of businesses now require employees in the office three to four days a week, a significant 35% have moved to a full five-day requirement—reflecting a strong push for traditional office engagement following the pandemic.

Rising costs are the main concern for businesses- who seek greater productivity from their office and staff

When asked about the main threats looming over the next 12 months, 43% of businesses cited rising inflation and higher interest rates—factors that increase the cost of borrowing. Other concerns include escalated employment costs and risks (30%), adverse tax policies (26%), and mounting property costs covering energy, rent, business rates, insurance, and service charges (21%).

In response to this challenging economic backdrop, companies appear to be doubling down on efforts to boost productivity by maximizing the functionality of their office spaces and encouraging face to face collaboration. 80% of businesses indicated that they are either currently monitoring individual office attendance or are planning to do so, underscoring the importance of data-driven space planning and the capability to be aware about what employees are doing.

Adapting Office Environments to Encourage Employees to Attend

Current office layouts are also putting pressure on firms' ability to accommodate all their staff in one place. Only 33.5% of respondents believe their existing space can handle full capacity, with 53% asserting that if everyone returned to the office, they would fall short. Consequently, many companies are reassessing both the type and amount of space they require moving forward.

To entice employees back into the office, 46% of businesses are integrating workplace environment and design into their broader strategies to attract and retain talent—and a further 35% are considering doing so. A decisive 95% have already involved HR teams in making decisions on working spaces.

In addition, 97% are offering employee incentives to boost on-site attendance, including flexible hours (59%), improved amenities (52%), adaptable office day arrangements (50%), career progression (49%) and bespoke office modifications (42%).

Employers are also investing in office enhancements that range from better collaborative space, communal areas, and restaurants to quiet working zones, individual pods, advanced IT facilities, and practical end-of-trip amenities such as showers and bicycle racks.

According to the survey, employers believe the main drivers for increased office attendance include enhanced collaboration and team-building efforts (41%), superior IT support (33%), a more appealing working environment than the home setting (31%) and opportunities for client engagement and networking (27%)

25% of employees themselves also noted that simply being “visible” in the office is important for career progression- particularly during these economically uncertain times.

Attaining net zero is not a goal on its own- this pathway is linked to cost reduction

Businesses acknowledge the importance of sustainability in their property strategies, but cost and return on investment remain primary drivers for making changes. While 45% of businesses cite expense as the biggest barrier to reducing their office’s environmental impact, many opt for lower-cost solutions such as switching to renewable energy (42%), office waste reduction (40%) purchasing eco-friendly office products (39%) and reducing energy consumption.

Only one sixth of businesses (17%) said sustainability was not a priority.

When choosing new office space, energy efficiency (42%) and adaptability (41%) rank as top environmental criteria, while factors like biodiversity (19%) and building certification (14%) are less influential. Notably, 47% of businesses would pay a higher rent for eco-friendly offices—but only if it comes with equivalent reductions in service charges or energy bills.

Businesses not concerned about EPC regulations

Businesses show limited concern about government’s current EPC regulations*. 72% said they would be willing to enter a lease on a building rated below the required B standard with a lease expiry beyond 2030, the government’s cut off point, provided location or rental terms are more favourable. Many office occupiers see EPC compliance as a landlord’s responsibility rather than their own. Additionally, nearly one in five respondents (18%) doubt the proposed legislation will even be implemented.

Rise in carbon emission reporting and green finance

Despite these reservations, corporate engagement with environmental initiatives is growing. 85% of businesses now report on their carbon emissions policies (Scope 1, 2 and 3), with 89% voluntarily doing so. While sustainability concerns play the largest reason for doing this, (54%), brand image (50%), client expectations (49%) and anticipating this will become mandatory (34%) also remain key motivators.

79% of businesses said they are or will be considering issues of embodied carbon in their property strategy.

Interest in green financing is also rising, with 35% of businesses already securing ESG-related finance and 43% considering it for future investments. 

Expert Opinion

“Our survey shows that the office and its place in the world of work continues to evolve, particularly as working patterns change.

"As rising costs and inflation impact corporate decision making and in line with the need to reduce unnecessary expenditure, businesses appreciate they need to improve the productivity of their current office space so that it can both accommodate increasing numbers of staff coming back in to work, but also one that can satisfy internal stakeholders’ needs and wishes.

"Environmental considerations play a part in this, but attitudes continue to shift away from the “nice to have” towards that “what is necessary” as the costs and associated benefits become clearer to see. Businesses are leaning towards more environmentally focused premises that help to drive down operational costs, whilst also supporting the demands of employees and those they do business with, whist enabling the company to avail itself of greater financing options.

“In the “Stay versus Go” decision, and in tight office market supply conditions, more businesses are now considering what is probably the least expensive option for expansion - to work closely with their current landlord to rework their existing office property and possibly add in an element of flex space as and when needed, giving themselves a breathing space to think about where they want to be more permanently.” Will Scott, Real Estates Disputes partner at Irwin Mitchell.