Firms Are Betting That Europe’s Offices Have a Long Future Ahead

British Land Leases 30% of City of London Office Project to JLL

09 Apr 2021, 11:20 AM IST

(Bloomberg) -- Firms are betting on the long-term future of Europe’s offices as vaccine rollouts entice workers back to city centers.

AXA IM Alts, part of AXA Investment Managers, has raised about 800 million euros ($949 million) from investors in Asia, the U.S. and Europe to develop offices and homes, according to a statement Thursday. The asset manager will target flexible offices in the U.K., France and Germany as firms adapt their working practices in the wake of the pandemic.

“Whilst the office sector has been characterized by uncertainty around future occupier need, it will remain an essential amenity for businesses to attract talent and we expect to see increased demand for CBD locations,” said Ian Chappell, head of development and value-added funds at AXA IM Alts.

British Land Co. said Thursday that it had rented out almost a third of a major City of London redevelopment four years ahead of its scheduled completion, in a further boost for the capital’s office market.

Real estate broker Jones Lang LaSalle Inc. has agreed to take 134,000 square feet (12,450 square meters) of space at 1 Broadgate in the heart of the financial district. The building will house Chicago-based JLL’s flagship U.K. office upon its expected completion in 2025.

The deals contrast with fears that companies and their employees will opt to spend less time in the office even after lockdown restrictions ease across the continent, with many firms vowing to slash their real estate footprint. Still, offices topped the list of targets for more than a third of real estate investors surveyed by CBRE Group Inc. last month, with London the most popular destination for those looking to Europe.

“1 Broadgate will be central to our plan as we recognise the importance that offices play in collaboration, innovation and fostering culture and wellbeing,” Stephanie Hyde, JLL’s head of U.K. and Ireland, said in the statement.

Bloomberg reported last month that British Land were also in talks to lease about 300,000 square feet of office space at 1 Broadgate to law firm Allen & Overy, according to people familiar with the negotiations. That would be the biggest office lease signed in London since the onset of the pandemic.

AXA’s bet on flexible office space comes as financial firms such as Grant Thornton UK LLP are finding from surveys that the vast majority of their workers would like to spend more than half their time working remotely. Rival firm PricewaterhouseCoopers is giving its employees Friday summer afternoons off this year.