The results of KPMG's annual outlook survey provide a clear indication of sentiment amongst CEOs that the return to five days in the office is firmly back on the agenda, with 64% of the 1,300 global chief executives who responded predicting a full return to in-office working by the end of 2026. In a competitive hiring market post-pandemic, businesses insisting on such an approach have in practice been in the minority. However, it is becoming increasingly clear that business leaders are motivated to bring the workforce back to the building. In a changing market, it is interesting to consider the considerations office occupiers will face over the coming years if this is to become the new norm and how that fits with the office investment landscape.

A general view of activity in the office market would seem to give credibility to such predictions, with Savills reporting offices as the leading sector for investment in 2023, accounting for 26% of all transactions in the first three quarters. However, this may paint too simple a picture of the differing approaches occupiers are taking to their office investment. Indeed, some occupiers have embraced the change to hybrid working practices in the longer term, with a view to the entrenched views of many employees since the pandemic on the work-life balance the approach provides as well as the associated cost savings of reducing office space. A number of the largest and longest-term occupiers have set examples in this respect, with Meta recently paying up £149 million to surrender its prime London office space (James Souter, one of our Real Estate Disputes Partners, wrote an opinion piece for City AM on this story)  and John Lewis recently securing new head office space in Pimlico, in a move that will effectively halve its current head office space in Victoria which it has occupied for 30 years. 

Such an approach won't be appropriate or desirable for all occupiers, particularly those with a motivation to phase-in a full office week. Cost consciousness in the short-term will need to be balanced with flexibility to increase office footprint over the coming years, a difficult balance to strike. Flexible office space will continue to play an important role and the already increasing demand for such spaces has resulted in an uptick in flexible office operators looking for space, with Savills reporting that 14 operators are looking for spaces over 20,000 sq ft. Landlords that are able to offer flexible office space alongside the more traditional lease models are now seen to be likely to increase rental income with such an approach, as occupiers show a willingness to pay more for flex space in a building. Flexibility in lease terms will also be increasingly important, as occupiers will want to be able to adapt as practices change, whether to the full office week or further towards hybrid working. The ability to assign, sub-let and break a lease in the medium term is likely to be negotiated carefully in an uncertain market.

It will not only be flexibility but the quality of space on offer that will be high on the agenda for occupiers, both from an environmental sustainability perspective and in terms of how the office is fitted out. As Simon Rowley at Great Portland Estates recently commented in the Estates Gazette podcast, landlords and occupiers will need to "earn the commute" with the office space offering, as occupiers look for more collaboration spaces, amenity and the highest ESG credentials. West End office space in particular has been highlighted as a promising asset class over the next year by Savills and a lot of attention will be given to ESG and fit-out by incoming tenants. 

Will we all be back in the office full-time by 2026? For the majority this will feel like a distant past but it will be fascinating to see how occupiers approach their office offering over the coming years with this back at the top of business leaders' minds.