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The world is witnessing a trend of businesses reducing their working space and office area in the new context, leading to many consequences for the office rental market in particular and the global real estate market in general.
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| Global office leasing market forecast to continue struggling |
On June 26, HSBC Bank announced plans to move about 8,000 employees working at its headquarters in Canary Wharf, the financial district in East London, England, to a complex of offices called Panorama St Paul near the city center by the end of 2026. This project is being renovated with an area of about 516,000 m², only half the area of nearly 1.02 million m² of the current headquarters. In addition, HSBC also committed to cutting up to 40% of the size of its offices globally in the coming time, one of the most drastic reduction targets among large enterprises.
In recent times, the world real estate market has witnessed a series of moves to reduce the size of offices by many large corporations. According to a survey by Knight Frank Real Estate Company in May, more than 50% of the world's largest corporations plan to reduce their working space by 10% - 20% within the next 3 years. Experts say that the reduction in the size of headquarters and offices by businesses is partly due to the trend of working from home, which flourished during the Covid-19 pandemic and has continued to this day.
In addition, green office design to meet sustainable development goals is also an inevitable trend under pressure from investors, environmental protection organizations and management agencies. Businesses realize that the choice of office space reflects the brand image and affects the way customers, partners and potential employees feel about the business.
Ms. Gerardine Davies, co-founder of investment fund Perenna Capital Management, commented that large businesses will be forced to change their operating models within their capabilities to pursue a synchronized green policy. Accordingly, the second half of 2023 will be clearly marked by the trend of focusing on decarbonizing office spaces. This is also part of the growing Environmental, Social, Governance (ESG) movement.
And as companies increasingly focus on sustainability and ESG-compliant energy-saving initiatives, real estate will take center stage. Because commercial real estate is one of the largest consumers of energy and is responsible for 40% of global carbon emissions, more than any other sector of the economy, according to the World Green Building Council.
2023 will see increased pressure on owners and investors to disclose more ESG investment information. Massive fines starting in 2024 are forcing corporations to adapt or die… For example, New York is poised to impose fines totaling $200 million on some 3,700 properties that fail to meet its requirements. The New York Climate Change Act, passed in 2019, is expected to prevent up to 49 million tons of CO2 emissions by 2040 and is about to be implemented. To achieve this goal, buildings that exceed the limit will be fined $268 per ton starting in 2024, with stricter standards expected to begin in 2030.
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