The COVID-19 pandemic brought about a seismic shift in how and where people work. Remote work, once a fringe benefit, became the norm almost overnight. Many predicted the traditional workspace would be dead, replaced by Zoom calls and home desks. However, as we move into the post-pandemic world, this narrative is rapidly changing. The workspace is not only alive but also evolving. Now, the UK faces a looming crisis: a severe shortage of high-quality workspace.
While remote work remains a part of the employment landscape, the idea that it would become a full-time, permanent fixture for most workers has proven overly optimistic. Many businesses have adopted hybrid models, and a significant number are encouraging or mandating a return to shared work environments. This shift back to the workspace has caught the property market off guard. Developers and investors, spooked by the initial exodus, pulled back on new developments. As a result, the pipeline for high-quality workspace has dried up just as demand is beginning to rebound.
Despite the clear signs of recovery in workspace occupancy, investor confidence in the commercial property market remains tepid. The viability of new developments is under intense scrutiny. Rising construction costs, higher interest rates, and uncertainty around long-term demand have made many investors hesitant to commit capital. This hesitancy is creating a bottleneck. Without investment, new projects stall, supply dwindles, and without supply, rents rise—especially for the best spaces.
The Flight to Quality
Occupiers are becoming increasingly discerning in their workspace choices. In a world where employees have more flexibility and options, businesses are under pressure to provide functional and inspiring workspaces. This has led to a “flight to quality,” with demand concentrated in premium, sustainable, well-located buildings with top-tier amenities.
Older, less efficient buildings are being left behind, but retrofitting these spaces to meet modern standards is expensive and often unviable. This has resulted in a growing mismatch between available and needed workspaces.
The Cost Conundrum
As demand for quality workspace increases and supply remains constrained, rents are climbing. However, it’s not just the rent that’s the issue. Occupiers are also grappling with rising service charges, energy costs, and the financial implications of meeting ESG (Environmental, Social, and Governance) standards.
Landlords, too, face mounting liabilities. Stricter regulations around energy efficiency and sustainability mean that many older buildings will soon be non-compliant. Without significant investment, these assets risk becoming stranded—unlettable and unsellable.
A Societal Issue: Where Will Growth Happen?
This isn’t just a property market problem; it’s a societal one. If the UK is serious about its growth agenda, we need to ask a fundamental question: where are our people going to work?
Economic growth requires productivity, and productivity often requires collaboration, innovation, and infrastructure. Workspaces are a critical part of that infrastructure. They are where ideas are exchanged, relationships are built, and businesses grow. If we don’t have enough of the right kind of workspace, we risk stifling the very growth we’re trying to achieve.
The Future of Cities: Vitality Through Variety and Vision
The future of cities lies in their ability to provide a variety of workspaces that cater to different needs and preferences. By embracing this diversity and vision, cities can foster productivity, innovation, and economic growth.
The future and vitality of UK cities depend on more than just having workspace – they depend on having the right mix of workspace types. Cities need to accommodate a wide range of businesses, from startups to global corporates, and that means offering a variety of workspace types at different price points.
To remain globally competitive, we need best-in-class, happy, healthy, and net-zero carbon buildings. However, we also need to think carefully about what we do with our existing workspace stock. The answer is not to demolish and rebuild everything – that would be environmentally and economically unsustainable. The embedded carbon in our existing buildings is significant, and we must find ways to reuse and rework the existing fabric of our cities in a sustainable and appropriate way.
This calls for a balanced approach. In my view, new and old can – and must – coexist. We absolutely need fantastic new spaces that set the standard for the future, but we also need a bigger, more strategic conversation about how we adapt and upgrade what we already have. This is not just about buildings – it’s about stewardship, sustainability, and long-term thinking.
A powerful example of how this vision can be realised is the partnership between HBD and the Greater Manchester Pension Fund (GMPF). GMPF has shown real long-term vision by being a key investor in the Manchester workspace market, recognising the importance of sustainable, future-ready developments to the region’s economic health.
Together, HBD and GMPF delivered Island, a landmark net zero carbon workspace in Manchester city centre. This project exemplifies what can be achieved when the public and private sectors work in true partnership. It’s not just about funding – it’s about shared values, aligned goals, and a commitment to creating places that work for people, businesses, and the planet.
This kind of initiative is exactly what the UK needs more of: bold, collaborative thinking that delivers real, lasting impact.
Time Is Not on Our Side
It’s crucial to remember that delivering new workspace isn’t a quick process. Building a workspace typically takes two years, and that doesn’t even allow for planning, financing, and design. In reality, the entire process can span several years from concept to completion.
Therefore, if we want to meet the demand of 2027, then only absolutely ‘oven ready’ developments will contribute, and I would question how many of these actually exist. We already face a supply issue, but if we don’t take action now, it will only worsen. The decisions we make today will shape the economic landscape of our cities for the next decade and beyond.
The Spending Review 2025: A Growth Mandate
The UK Government’s 2025 Spending Review emphasises this urgency. While framed by tight fiscal controls, it clearly states that growth, innovation, and regional regeneration are national priorities. With £131 billion in capital spending and a strong focus on science, technology, and place-based investment, the Review outlines a vision for long-term renewal.
However, much of this funding is backloaded or repurposed, and the burden of delivery has been shifted towards local authorities and private sector partners. This presents both a challenge and an opportunity for the commercial property sector. The message is clear: public-private collaboration is essential to unlocking the infrastructure and workspace needed to support the UK’s growth ambitions.
A Call for Collaboration: Government, Developers, and Cities
Solving this crisis requires coordinated action. Developers cannot do it alone. The UK government, city councils, and mayors must work together to create an environment that supports workspace development and regeneration.
This involves streamlining planning processes, offering incentives for sustainable construction and retrofit, and investing in the infrastructure that supports vibrant business districts. It also means recognising that workspace is not just a commercial asset but a public good that underpins economic activity.
The Role of UK Pension Funds: National Infrastructure?
There’s a compelling argument to be made that quality workspace should be treated as national infrastructure. Just as we invest in roads, railways, and broadband, we should invest in the places where people work. UK pension funds, with their long-term investment horizons and need for stable returns, are well-positioned to play a role in this. By viewing workspace development and regeneration as a form of infrastructure investment, they can help bridge the funding gap and support the evolution of our cities.
Looking Ahead: A Strategic Imperative
The UK stands at a crossroads. We can continue to underinvest in the spaces where work happens and risk falling behind in the global race for talent and innovation. Alternatively, we can take bold, coordinated action to ensure that our cities have the workspace they need to thrive.
This is not just about buildings. It’s about people, productivity, and potential. It’s about creating environments where businesses can grow and communities can flourish. It’s about recognising that workspace, far from being obsolete, is a cornerstone of our economic future.