Soaring energy bills are pushing UK businesses to ditch office space to save money, according to the boss of one of the world’s biggest workplace services companies.
Companies are urgently considering how to reduce power consumption, said Jacob Aarup-Andersen, chief executive of ISS, which manages offices for some of the world’s biggest companies, as energy costs account for more than 7 per cent of total office occupancy costs.
“We were having these conversations around sustainability a year ago, but we couldn’t get financial departments on board. Now the conversation is being driven by the CFO,” said Aarup-Andersen in an interview with the Financial Times.
Clients of ISS were looking to gather staff on fewer floors and shut down services on others to save on energy bills, he added.
The cost of occupying office space has hit its highest ever level, driven up by 13 per cent in the past 12 months as expenses ranging from food to building materials and printing have leapt, according to property consultancy Lambert Smith Hampton.
Energy bills have risen at a faster pace than other expenses, doubling over the past year, according to LSH.
Aarup-Andersen expected the change in companies’ attitudes to endure even if energy prices settled in the near-term.
With higher energy bills and general inflation, it’s more expensive working from home. And with a recession coming, human behaviour is driving people back.
“Just like Covid has left a scar on the way we think about hygiene and disinfection, there is no doubt this period will leave companies wanting to be more energy efficient,” he said.
Office tenants pay for their energy either directly or, in multi-let buildings, via the service charge after the landlord’s property manager has negotiated a contract, according to Ailsa Shaylor, head of ESG on BNP Paribas Real Estate’s property management team.
As well as higher bills, corporate occupiers are still navigating the fallout from Covid, with office occupancy levels still far from pre-pandemic levels, particularly in the UK.
“The biggest laggard [on return to work] we’re seeing globally is Greater London, then New York,” said Aarup-Anderson, who puts the reluctance to return partly on the length of commutes in those cities.
In the UK, average occupancy is stuck at around 30 per cent, which is half pre-pandemic levels, according to Remit Consulting.
“If I look at 2020 compared to today, there’s been a significant change that is enduring: it’s clear that hybrid [work] is here to stay,” said Aarup-Andersen.
There is “no doubt” that lower occupancy and higher costs will trigger occupiers to cut back or convert space, he added.
But the threat of job cuts as the economy cools and a jump in domestic energy costs could ultimately encourage workers to venture back to offices in the UK.
“With higher energy bills and general inflation, it’s more expensive working from home. And with a recession coming, human behaviour is driving people back,” said Aarup-Andersen. – Copyright The Financial Times Limited 2022
