Marked a significant analysis by Morgan Stanley analysts regarding the evolving landscape of office real estate. In a comprehensive report, they identified 'hot desking' – the practice of not assigning permanent desks to employees – as a major factor influencing the market, alongside the growing trend of remote work.
The report, led by Sebastian Isola and his team, underscored that the increased adoption of hot desking could significantly reduce the need for office space, profoundly impacting demand in the sector. This shift, coupled with the rise in remote working models, poses a considerable challenge to commercial and office real estate firms, who are already contending with these changes.
Particularly notable is the prevalence of hot desking in the United Kingdom. Post-Covid, 30% of UK companies have adopted this flexible workspace model, compared to around 20% in Germany and France, and just 13% in the United States. This trend, albeit popular in Britain even before the pandemic, indicates a significant shift in workplace culture.
Interestingly, despite these trends, Morgan Stanley maintains a positive outlook on London-focused office stocks. They highlight that businesses are increasingly favoring central city locations rich in amenities, suggesting a continuing demand for premium office spaces. As a result, the firm has maintained overweight ratings on notable London real estate stocks like Derwent London Plc, Great Portland Estates Plc, and British Land Co. Plc, despite their challenges this year due to rising interest rates affecting debt servicing and asset values.
This analysis forms part of a broader conversation about the future of office spaces in an increasingly digital and flexible working world, with significant implications for real estate investment and urban planning.