The office is a quality trade

The argument about whether people would return to offices is effectively settled. Survey work on occupier sentiment reports the large majority of office-using organisations now requiring at least three days a week on site, with full-week requirements common at the largest firms.

What has not followed is a recovery in office demand, and the reason is that the mandate and the lease are different decisions made years apart. A company can require attendance tomorrow and cannot change its footprint until its lease expires.

When those leases do come up, the pattern has been consistent: less space, better building. Tenants are leaving older stock for smaller floors in newer towers, which produces rising demand for a narrow band of buildings and continued weakness for everything else.

That bifurcation is the whole market now. Aggregate vacancy figures average two conditions that have nothing to do with each other, and a headline number that looks stable can describe prime space at full occupancy alongside older buildings that will not lease at any price.

The oldest stock has the hardest problem, because the alternative uses are worse than they sound. Converting an office to housing works where the floorplate is narrow and the plumbing can be run, and most towers built for open floors fail both tests.

Supply has adjusted in the only way it can, which is by stopping. Construction deliveries have fallen to their lowest rate in more than a decade, which will eventually tighten the market for good space and does nothing for the rest.

The uncomfortable detail inside the mandate story is that the buildings were mostly not improved. A requirement to attend was issued far more often than a decision to make the office worth attending, and the gap is visible in occupancy that peaks well below capacity.

That gap is where the policy is quietly tested. An employee required to commute to a building indistinguishable from the one they left in 2019 is being asked to absorb a cost for a benefit the employer has not tried to demonstrate.

For landlords the implication is unwelcome and clear. The tenant is buying a product rather than square footage, and the buildings winning are the ones treated as a service with amenities and management attached.

The honest summary is that the return happened and the recovery did not. Attendance is up, occupancy is uneven, and the value is concentrating in a small share of the stock while the rest waits for a use nobody has found.