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The corporate world’s post-COVID era has been defined by a tug-of-war between staff and employers over returning to the office. Amid a wave of new mandates from major companies, it looks like the bosses have been winning.
Now, though, Big Four accounting firm EY could be pulling the balance back towards long-term worker flexibility by potentially committing to long-term hybrid working.
The partnership is reportedly looking to give up its London Bridge office—its home for the last 20 years—in the latest blow for corporate real estate as companies adapt to worker demands.
The Telegraph and Bloomberg reported that the accountancy firm is considering vacating its massive 10-story building near London Bridge that houses 9,000 employees, citing people familiar with the matter.
EY launched a property review of its U.K. headquarters at More London under the belief that fewer people are working in the office, the publications reported.
The reported review comes ahead of the end of the group’s 25-year lease at More London in 2028. The review is in its early phases and is expected to take into account occupancy levels, according to the publications.
EY moved to a hybrid model in the U.K. in 2021. This gave staff the freedom to work remotely at least two days a week, with an expectation that they would work at client sites or in the office the rest of the time.
It’s understood that the More London office now operates at 88% occupancy on Tuesdays and Thursdays, the publications reported, citing people familiar with the matter.
Bloomberg reported that EY was considering moving to an environmentally friendly building to help towards its goal of being carbon neutral by 2025, citing one person.
A representative for EY told Fortune: “As a growing business with over 20 offices across the U.K., we continually review our real estate footprint. We do not comment on speculation.”
Office space shrinking
Pricey real estate has been a big motivator for companies trying to get their workers back into the office, particularly those that took up long leases before the pandemic struck. But other major companies have begun vacating their office space as they either embrace hybrid working or spy opportunities to cut costs.
In June, global banking giant HSBC said it was planning to move out of its iconic Canary Wharf headquarters, the Times of London first reported.
The group, which housed nearly 8,000 staff in the 45-story building, said it expected to move to the center of London in 2027 amid a drive to reduce global office space by 40%.
In September, Meta ended a lease on office space in the center of London 18 years ahead of schedule, citing an inability to fill it. The move cost Mark Zuckerberg’s company an eye-watering £149 million ($181 million).
Plans to shrink office space or leave it altogether have been the source of major headaches for London’s corporate real estate operators, who face years of painful adjustment to the new future of work.
In September, investment bank Jefferies said London was in a “rental recession” as office vacancies in the city hit a 30-year high, Reuters reported.
A June report by Capital Economics predicted a 35% plunge in office values by 2025, a decline that is unlikely to be recovered until 2040.
The consultancy’s predictions are far from an outlier. The head of real estate brokerage CBRE said commercial real estate value in the U.S. could decline by another 10% on top of an initial decline of 15% to 20%.
Gary Shilling, an economist who predicted the 2008 housing crash, described commercial real estate as a bubble on the verge of bursting.
“This isn’t of the magnitude of the subprime-mortgage bonanza, but I think it is a bubble which is beginning to crack,” Shilling said on investing podcast The Julia La Roche Show.
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