London‘s office blocks are undergoing their biggest change for a generation, with once bustling workspaces redesigned to accommodate fewer staff as more work from home. 

Plans for the HSBC tower in Canary Wharf provide the latest proof of this trend, with large chunks set to be removed from the building and leisure facilities added after the bank relocates to the City of London in 2027. 

Just £2.5billion of central London offices are set to be sold in 2024, down 28 per cent from the already depressed market last year, property advisory group JLL found. 

Demand is especially low for large offices, with only three deals over £100million in the first half of the year, down from nine over the same period in 2023 and 26 in 2022, according to data analytics company CoStar. 

Property experts warn that selling big offices in London is now ‘really difficult’, with a series of high-profile sites across the capital struggling to find buyers. 

Canary Wharf has borne the brunt of changing working patterns, and HSBC’s announcement last year that it was leaving the 45-storey tower that bears its name was a massive blow for the East London financial district. 

The mooted renovation of the tower into a ‘mixed-use development’ is claimed to be the biggest of its kind, and is aimed at making the building more attractive to future tenants. 

Parts of the tower will be cut out for trendy terraces and there will also be a public viewing gallery. Other sections of the office block will be changed into leisure facilities.

A new tenant to replace HSBC cannot be found until the development plans are given the greenlight, with the project expected to be completed around 2023. 

The rise of hybrid working has prompted companies to move towards smaller yet higher quality offices instead of the larger spaces that were popular pre-pandemic. 

According to figures from JLL, nearly half of clients in major markets including the UK, Germany and France are seeking to decrease their footprint in the next three to five years as a result. 

The dire state of the market means several major office blocks in London have remained stranded on the market.

West End offices blocks 90 Whitfield Street and 1 Newman Street were marketed for £120m and £200m consecutively but attracted bids well under the asking price. 

Other cut-price deals that have been cancelled in recent months include 20 Old Bailey in the City and 5 Churchill Place in Canary Wharf, the Financial Times reported. 

 A lack of demand for large office blocks due to changing working patterns has been compounded by rising interest rates, which make it harder for buyers to raise the large amounts of capital needed to purchase them. 

‘Large, debt-fuelled transactions have fallen away to a greater extent than smaller ones over the past year or so,’ said Mark Stansfield is Senior Director of UK Analytics at CoStar. 

‘The buyer pool is more rarefied at this level and higher borrowing costs and a pricing disconnect between buyers and sellers have dragged on activity.’

He said the vacancy rate for central London stood at 9.9 per cent as of June 2024, up from 4.7 per cent in 2019. 

Labour’s plans to introduce the right to flexible working ‘from day one’ may serve to quicken the shift away from large offices.   

The measure also aims to give workers immediate access to sickness and parental leave, ban zero-hour contracts, and provide protection from unfair dismissal.

But small town centre businesses across England and Scotland warned the move could be a disaster for shops and may cause a 60 per cent drop-off in customers.

Recent research found nine in ten chief executives regularly work from home, with only seven per cent of the bosses surveyed said they worked from a central office all five days of the working week.

A staggering 90 per cent split their time between the head office, ‘flexible’ workplaces and their homes, according to a survey of 500 CEOs by International Workplace Group, reported by The Times. 

Two thirds admitted believing they would lose staff if they forced employees to come into the office every day, and three quarters said embracing hybrid working helped bring in high quality talent.

The main attraction of WFH was cited as avoiding a long commute, and bosses said offering more flexibility to their staff meant they could consider a more diverse range of applicants.

However, despite the poll results, some businesses are trying to force workers back to their desks with school-like policies such as monitoring attendances and swipe-card data.

One example of these demands is Sir Jim Ratcliffe, the billionaire co-owner of Manchester United, ordering the club’s staff to return to the office full-time or to find another job.

Politicians have also tried to convince civil servants to come back to the office.