Office Market Recovery Driven by Employee Return
The commercial office market has faced substantial upheaval in recent years, driven by the global pandemic, shifting work practices, and the rapid rise of remote work. However, as we move further into 2025, there are promising signs of recovery, with many businesses seeking to return to pre-pandemic levels of office occupancy. The push to bring employees back to the office is expected to play a significant role in revitalising the office market, driving higher transaction volumes, and boosting sector growth.
Notably, companies like Savills, a global real estate services provider, are reporting strong profits and anticipating an increase in activity within the office sector. This recovery is not only crucial for the real estate market but also has broader implications for the economy, urban development, and work culture. In this article, we will explore the key factors driving the recovery of the office market, the role of the employee return to the office, and what the future holds for office spaces in 2025 and beyond.
The Pandemic's Impact on the Office Market
The COVID-19 pandemic irrevocably changed the commercial real estate landscape. In the early days of the pandemic, offices across the globe emptied as businesses rapidly shifted to remote work. This sudden transition left many office buildings underused, with companies reassessing their need for large physical office spaces. As a result, many businesses adopted hybrid or fully remote working models, and some began to question the future of traditional office environments altogether.
In the UK, the effects of this shift were stark. According to a report by the British Property Federation (BPF), office vacancy rates in central London surged to their highest levels in years, with an increase in available office space as businesses reduced their footprints or moved to more flexible workspaces. Similarly, in the US, office vacancy rates in major cities like New York and San Francisco climbed sharply. Many businesses chose to downsize or shift to more agile and flexible office arrangements that could accommodate a hybrid workforce.
However, despite these challenges, the commercial real estate market remained resilient in the face of this disruption. The office sector, while severely impacted by the rise of remote work, has not been entirely abandoned. As vaccination rates climbed and restrictions were lifted, businesses began to contemplate the future of their office space needs, leading to a gradual shift back toward physical offices. As of 2025, it appears that this return to office work is gaining momentum, sparking a recovery within the office market.
The Push for Employees to Return to the Office
One of the primary factors driving the recovery of the office market in 2025 is the push from employers for their employees to return to the office, or at least to embrace hybrid working models. While remote work undoubtedly offered benefits in terms of flexibility and cost-saving during the pandemic, it also presented challenges in terms of collaboration, productivity, and employee wellbeing. In recent months, many employers have recognised that in-person interactions and a strong office culture are essential for fostering innovation, teamwork, and long-term business success.
Several factors are influencing the return-to-office trend. First, businesses are keen to rebuild the social and cultural fabric of their organisations. The office environment facilitates face-to-face communication, spontaneous brainstorming sessions, and team-building activities that are difficult to replicate remotely. For industries such as finance, technology, and creative services, the office is not just a place to work, but also a space where collaboration and innovation happen organically.
Second, the pandemic highlighted the potential mental and physical toll of prolonged remote work. Many employees have reported feelings of isolation, burnout, and difficulty separating work from personal life while working from home. Employers are now recognising the importance of providing employees with spaces where they can connect, collaborate, and find a better work-life balance. As a result, companies are looking to reintroduce the office as a central hub for these experiences, while offering greater flexibility in terms of work hours and location.
Finally, there are operational considerations driving the return to the office. For certain businesses, especially those reliant on client-facing activities, having employees in the office is essential for maintaining relationships with clients, suppliers, and partners. In some sectors, such as legal services, consulting, and technology, the physical office remains an important venue for hosting meetings, pitching new business, and conducting training sessions. As companies seek to re-establish themselves after the challenges of the pandemic, the return to office working is a crucial step in restoring normalcy and momentum.
Transaction Volumes Expected to Rise in 2025
As more businesses embrace the idea of bringing employees back to the office, the office market is expected to experience an uptick in transaction volumes in 2025. Transaction volumes, including leasing activity, sales, and investments, have been sluggish in recent years due to uncertainty surrounding the future of office spaces. However, as companies commit to returning to physical office environments, demand for office space is expected to grow, particularly in prime locations that offer flexible and modern office facilities.
One of the most notable indicators of a recovering office market is the performance of global real estate services companies like Savills. Savills has reported strong profits in recent quarters, with an uptick in activity in the office sector. The company has been particularly focused on facilitating deals for businesses seeking to secure office space in key urban locations. Savills’ optimism for the office sector in 2025 is reflected in its forecast for increased leasing activity and a steady stream of investment transactions. This recovery is expected to be driven by a combination of pent-up demand, increased business confidence, and the strategic need for businesses to secure office space to accommodate their returning workforce.
In particular, flexible office spaces and serviced offices are seeing a rise in demand. Flexible office space providers, such as WeWork, have reported significant increases in demand as businesses seek short-term leases or spaces that can be quickly adapted to hybrid working arrangements. The shift towards hybrid work is pushing businesses to reconsider how much space they need, with many choosing to lease smaller, more flexible spaces that can accommodate fluctuating workforce numbers. This trend is contributing to the recovery of the office market, especially in cities that offer a mix of flexible working environments and high-quality office space.
Factors Influencing Office Market Recovery
Several factors are contributing to the recovery of the office market, with the employee return being one of the most significant catalysts. Beyond this, there are other key trends shaping the market’s future.
1. Hybrid Work and Flexible Workspaces
As mentioned earlier, hybrid work is likely to remain a dominant feature of the workforce in 2025 and beyond. Many companies are opting for hybrid working models, where employees split their time between home and the office. To accommodate this shift, businesses are investing in more flexible office spaces that can cater to different working styles. This includes shared workspaces, hot-desking arrangements, and offices with modular designs that can be easily reconfigured as needed. The demand for such spaces is expected to continue driving transaction volumes in the office sector.
2. Sustainability and Green Buildings
Another important factor influencing the office market is the growing demand for sustainable and environmentally-friendly office spaces. In 2025, many businesses are prioritising sustainability as part of their corporate social responsibility initiatives. As a result, there is increasing demand for office buildings that meet green certification standards, such as BREEAM or LEED. These buildings offer energy-efficient features, lower carbon footprints, and better indoor environmental quality, making them attractive to companies that want to reduce their environmental impact.
Real estate developers and landlords are responding to this demand by investing in sustainable office buildings. As businesses return to the office, many are opting for spaces that align with their environmental goals. This trend is expected to continue driving transactions in the office sector, particularly in cities that are focused on sustainability and climate action.
3. Technology and Innovation
The office market recovery is also being shaped by advancements in technology. The integration of technology into office spaces is becoming increasingly important, as businesses seek to provide employees with state-of-the-art tools for collaboration, communication, and productivity. From smart building technologies to advanced video conferencing facilities, the office environment is evolving to meet the needs of modern workers.
As businesses bring employees back to the office, the demand for tech-enabled office spaces is expected to grow. Office buildings that can support high-speed internet, video conferencing equipment, and other advanced technologies will be in high demand. This trend is expected to drive transaction volumes as companies seek to secure spaces that can support their digital transformation efforts.
The Future of the Office Market
Looking ahead, the office market in 2025 and beyond is poised for recovery, driven largely by the return of employees to physical office spaces. As businesses continue to embrace hybrid work models and invest in flexible, sustainable, and tech-enabled office environments, transaction volumes in the office sector are expected to rise.
However, the future of the office market is not without its challenges. While many businesses are eager to return to the office, there will likely be some continued uncertainty around the long-term demand for office space. The pandemic has changed the way people work, and many businesses will continue to adopt flexible working arrangements, meaning the demand for traditional office space may never fully return to pre-pandemic levels.
Nonetheless, the office sector’s resilience, coupled with the push to bring employees back to the office, suggests that the market will continue to recover throughout 2025 and into the following years. As the demand for flexible, sustainable, and innovative office spaces grows, the office market is set to evolve in response to changing workplace dynamics, technological advancements, and employee preferences.
Conclusion
In conclusion, the office market is poised for a strong recovery in 2025, driven by the return of employees to the office and the growing demand for flexible, sustainable, and tech-enabled office spaces. As businesses look to rebuild and strengthen their cultures, drive innovation, and create work environments that support hybrid work, the office market will see an uptick in transaction volumes, with companies like Savills reporting strong profits and anticipating increased activity in the sector. While challenges remain, the office market’s recovery offers promising prospects for real estate investors, businesses, and the economy at large.
