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Office space market begins to reignite as Skadden makes City move

Office space enquiries have returned to pre-Covid levels according to one space provider, as employers seek to adjust to the new hybrid working environment.

Serviced office giant IWG has announced that its second quarter saw strong demand for hybrid working solutions and said it was cautiously optimistic about the rest of the fiscal year. However, it had also posted a bigger half-year loss – of £172m – than expected as a resurgence in global Covid-19 cases and renewed lockdowns in some markets slowed the pace of recovery.

This was a major improvement for the same period last year, when the loss was £238m.

The FTSE 250 company, formerly known as Regus, said it was now expecting a strong recovery in 2022 rather than this year, as pace of the rebound from the pandemic was slower than had been anticipated.

“We look forward to the second half with cautious optimism having implemented the necessary changes to our network and cost base,” chief executive officer Mark Dixon stated.

IWG said it had added a record 900 new clients in the first half and experienced a “very strong recovery” in meeting room and day office usage in the second quarter, with revenues from the hiring of meeting rooms and day offices increasing by 40% between the first and second quarters of 2021.

Dixon said: “The significant move to hybrid working has created unprecedented demand for our flexible work products.

“This fundamental shift in the way people work is clearly a positive tailwind for IWG over the medium to longer term and we are seeing increasing levels of interest from enterprises wishing to transform their working practices.”

IWG said although Europe, the Middle East and Africa was the strongest performing region, with only a 2.5% decrease in revenues, the UK had seen a revenue fall of 18.5%. Occupancy in the UK had now climbed to 67.7% of pre-Covid levels with meeting room demand returning strongly in June.

Law firms, like many other office-based entities, are still reshaping their physical environments to meet the needs of their workforce. 

Companies making significant changes include DWF and Gowling WLG, that have both reassessed their real estate portfolios to cut costs, and Allen & Overy, which has said its need for office space would “reduce considerably” as a result of hybrid working.

One law firm making a bold new move, however, is New York-headquartered law firm Skadden, Arps, Slate, Meagher & Flom LLP. The mergers and acquisitions, banking and capital markets specialist has signed a deal to take 65,000 square feet (three floors) of office space at 22 Bishopsgate, one of the City of London’s latest skyscrapers. It’s 250-strong London team, currently based in Canary Wharf, will move into the building in 2022.

The 15-year lease means the 62-storey tower, where construction completed late last year, is now 60% let. At 278 metres it is the second highest building in London, 32 metres shorter than the Shard.

Phillip Shalless, senior asset manager at building developer AXA IM Alts, said: “This letting to such a prestigious global law firm as Skadden is both a further endorsement of the appeal of 22 Bishopsgate, and highlights the crucial role that the centre of London continues to play in creating the right space for talent and business to thrive.”

Companies taking space in the building, which was completed last year, have access to a spectacular “sky-wall” climbing window at 125 metres above ground, a gym with a boxing ring, restaurant and bars, viewing gallery, bike storage facilities, a yoga retreat area and conference spaces.

Shalless added: “Since restrictions began to ease in March, we have seen a material uplift in occupier enquiries, as businesses reflect on the lockdown-experience and seek adaptable space with best-in class amenity and smart technology.”

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