Rising Power Cost Prompts UK Firms To Review Office Usage

UNITED KINGDOM – ISS, a £3 billion-firm that oversees the workspace for some of the world’s largest businesses, revealed that the huge increase in electricity costs are pushing companies here to slash office space to reduce expenses, according to a recent report from The Financial Times.

“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 ISS’ Chief Executive Jacob Aarup-Andersen, adding that power costs make up over 7 percent of the total office occupancy costs.

He disclosed that ISS’ customers are considering to close some office floors and gather employees on fewer levels to save on energy expenses.

Notably, the office occupancy costs have increased by 13 percent in the past 12 months to reach its highest level, as expenses ranging from food, printing, to construction materials have climbed significantly. In particular, electricity cost has surged at a faster pace than other expenses as doubled during the said period, said real estate consultancy Lambert Smith Hampton.

“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,” noted Aarup-Andersen.

Ailsa Shaylor, Head of ESG at BNP Paribas Real Estate’s property management department, explained that office occupants pay for their power either directly, or via service charges in multi-let commercial properties after the owner’s property manager has brokered an agreement.

In addition, office occupancy rates across the globe is still far from pre-pandemic levels, especially in the UK.

“The biggest laggard [on return to work] we’re seeing globally is Greater London, then New York,” said Aarup-Anderson, who blames the slow return to the office partly on the long commutes in those cities.

Remit Consulting shared that in the UK, average office occupancy is stuck at about 30 percent, which is half pre-pandemic levels

There is “no doubt” that lower office occupancy and higher costs will prompt tenants to reduce or convert workspace, said Aarup-Andersen.

Still, the surge in the UK’s power costs and the threat of layoffs as the economy weakens could ultimately encourage employees to return to their offices. “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,” he added.