The pandemic is long over, but the return to the workplace in London's office towers has not happened as expected. This might be due to the increased bargaining power of employees in the face of a depleted job market. Many have grown accustomed to remote work, facilitated significantly by new technologies. The statistics from rail companies tell a clear story; monthly passenger numbers on Southeastern, Southwestern Railways, and Govia Thameslink heading towards the city center have decreased by a third compared to pre-Sars-CoV-2 levels, resulting in 22 million fewer passengers.

In response, rail operators have reduced services, leading to overcrowded trains during peak hours, making the return to the office even less appealing - not to mention the disruptions caused by the ongoing strikes. Younger employees are more willing to return. Those who prefer not to return only do so when necessary. According to the Centre for Cities, three out of four companies have instructed their employees to spend at least one day a week in the office. One-fourth do so more frequently.

"We observe people commuting on Tuesdays, Wednesdays, and Thursdays," notes Angie Doll, head of Govia Thameslink Railway, before the city parliament's transportation committee. "This pattern has solidified. I can't imagine it changing again." During the pandemic, people embraced remote work to a degree they never thought possible. Two years later, little has changed.

The subway's occupancy rate is at 85% of pre-coronavirus levels. The US investment bank Jefferies analyzed rides to and from major subway stations in the City of London and the West End during peak hours on weekdays. They also concluded that Tuesday, Wednesday, and Thursday are the most active days. This does not only affect numerous employee service businesses such as coffee shops, eateries, pubs, and dry cleaners. When companies trim excess office space to cut operational costs, it also dampens the business outlook of landlords.

HSBC plans to relocate its global headquarters in 2027. Then, the lease for the 45-story skyscraper in Canary Wharf, where the British bank is currently located, will expire. HSBC has been based there for 20 years. Allegedly, they intend to move to the former BT headquarters in the City. The "Magic Circle" law firm Clifford Chance will return to the Square Mile from the Isle of Dogs in 2028. They agreed to move into a real estate project by the property company Great Portland Estates, set to be completed in December 2025. Moody's rating agency is also considering alternatives to Canary Wharf. The office towers from the 1990s that characterize the area seem like a vision of the past. More than three decades after the construction of One Canada Square, the pyramid-topped skyscraper, the financial sector is set to return to the City due to reduced space requirements.

It was Margaret Thatcher's government that once established the London Docklands Development Corporation to repurpose the dormant areas in East London. Today, the Canary Wharf Group belongs to the Canadian financial investor Brookfield Property Partners and the Qatar Investment Authority sovereign wealth fund. In May, Moody's downgraded the group's debt from "Ba1" to "Ba3," citing debts of over £1.4 billion due in 2024 and 2025. Given the challenging operational and financial environment, the group might rely on asset sales and support from its shareholders for deleveraging and refinancing.

Jefferies compares the impact of "work from home" with the consequences of online shopping. "Retail was the first victim of technology," writes Mike Prew, the institute's real estate analyst. "We think offices will be next. Occupancy has fallen, and landlords are losing pricing power while tenants reduce excess spaces." Vacancy rates in the UK capital are as high as they have been in 30 years. It stands at 7% in the West End, 10% in the City, and over 20% in Canary Wharf. The tipping point for decreasing rents is around 8%. Prew expects rents in the West End to decrease by 5% and in the City of London by 15%. The rarely seen 'green' office towers stand out as an exception. The costs for upgrading older properties to meet green standards are constantly increasing.

Flexible office concepts, coworking providers like WeWork, and serviced offices occupy about 9% of London's office spaces, as estimated by Jefferies. They have absorbed vacancies and extended the ongoing rental cycle. However, this creates a mismatch for landlords between short-term income and long-term obligations. The spectacular downfall of WeWork, once valued at $40 billion by Softbank, should raise alarms for many real estate companies. After all, the area operated by the US company in London is five times the size of the "Gherkin," the highly visible cucumber-shaped tower designed by star architect Norman Foster.

For London, declining property prices aren't bad news. Office rents and prices there have risen faster than in the rest of the UK. According to the thinktank Centre for Cities, high rents were one reason why the capital lagged behind the national average in terms of productivity. Rising residential property prices and restrictive immigration policies also deteriorated London's position in the global competition for top talent.