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Is this the death of the office or just the start of its second life?
6 min read 26 Oct 26
Predictions of the office’s demise rest on the idea that if people spend less time at their desks, offices will be worth less. Noura Tan, together with the M&G Real Estate Team, looks beyond vacancy rates and office attendance patterns to examine how buildings adapt when the economic and social forces that once shaped them begin to change.
Few real estate sectors generate such contradictory narratives as the office. In the same week, investors can read about rising vacancy rates, shrinking corporate footprints and the supposed demise of the daily commute, while watching firms compete fiercely for space in the world’s leading business districts. Ageing office blocks sit half empty across many cities, even as occupiers pay record rents for buildings capable of attracting talent and bringing people together.
Hybrid working, tighter environmental standards and advances in AI are widening the divide between those two outcomes. Across key western European markets, vacancy rates in central business districts generally remain between 2%–8%, while wider office space vacancy ranges from 6%–18%, reflecting a growing accumulation of ageing and unwanted stock beyond the urban core1. Paris alone ended Q2 2026 with more than 6.5 million square metres of vacant office space, roughly double pre-pandemic levels2.
Vacancy figures can create the impression of dwindling demand, yet much of what has changed is where that demand is directed. As AI and digital tools absorb more routine work, the office is increasingly reserved for higher value interactions that benefit most from people being together: knowledge-sharing, talent development, idea generation and decision-making. For investors, the question is how buildings will create value as the assumptions on which they were developed begin to change.
The office as a destination
Hybrid working has reduced the amount of office space many organisations require while raising expectations of the space they retain. Buildings conceived around fixed attendance now compete for a narrower place within the working week, judged on their environmental performance, convenience and experience alongside the more familiar considerations of location and cost. With offices below EPC B3 expected to become non-compliant in the UK in the next five years, and only 19% of London's commercial buildings currently achieving an EPC B rating or higher4, sustainability has become a prerequisite for commercial relevance rather than a secondary consideration.
Hybrid working has reduced the amount of office space many organisations require while raising expectations of the space they retain.
3 Avenue Hoche in Paris sits within that wider story. A short walk from the Arc de Triomphe, it occupies one of the French capital’s most established business addresses, where appetite for premium space has proved resilient across repeated market cycles. The location has retained its appeal. Behind the façade, however, stood a building conceived in the 1970s, when employees typically arrived five days a week, energy consumption attracted limited scrutiny and amenities rarely stretched beyond the office floor itself. Its refurbishment captures how much that brief has changed.
An improvement in the building’s EPC rating from E to C, and its alignment with France’s Décret Tertiaire targets5 placed environmental performance at the heart of the project. The addition of a gym, food court and bicycle storage also demonstrate how offices are increasingly expected to absorb functions that were once scattered across the working day.
Many of the world’s most desirable business districts face the same tension where their addresses remain valuable, but the buildings occupying them were designed for working patterns that have receded. Refurbishment can preserve the advantages of an established location while bringing the space inside it closer to what modern occupiers require.
When the best use is no longer an office
Not every building can be refurbished back into relevance, nor is office use always the most productive use of scarce urban land. As demand for workspace has become more selective, housing shortages have intensified across much of Europe. Housing completions fell by 10% in 20256, while permitting remains well below the level required to ease longstanding shortages7. Many of the offices struggling to attract occupiers occupy precisely the places where new homes are hardest to build: established neighbourhoods close to employment, transport and amenities.
Not every building can be refurbished back into relevance, nor is office use always the most productive use of scarce urban land.
These dynamics intersected at One Vincent Square, a vacant 27,000 square foot office building occupying a prominent corner site overlooking Vincent Square in Westminster. With rare triple street frontage in a prime residential district close to the West End, Victoria and Pimlico, it sat within one of London’s most constrained housing markets.
Changes to permitted development rights, which streamlined the conversion of offices into residential use, facilitated the transformation of the former office building into 26 apartments, supported by additional planning consents for balconies, terraces and façade enhancements. At a time when housing delivery in Westminster has fallen to a ten-year low, the project demonstrates how repositioning can unlock value by aligning an asset with the strongest source of demand in its surrounding market.
Research suggests that office conversions could create more than 50,000 homes in Paris8 and over 40,000 in London9. Capturing that opportunity depends on recognising that the most productive use of a site is not fixed. Household formation, housing shortages, transport investment and shifting neighbourhood dynamics can all alter the role a location is best placed to perform.
From business district to mixed use ecosystem
What made One Vincent Square a housing opportunity forms part of a broader reorganisation of urban space. Although much of the post-pandemic office debate has centred on what happens inside buildings, many of the more consequential changes are unfolding in the streets and districts beyond them.
The daily commute once provided the organising rhythm of the central business district, sustaining a predictable ecosystem of retail, hospitality and transport. As attendance patterns become less regular, commercial districts are being reshaped around a broader mix of activities and reasons to visit.
Positioned where Sydney’s commercial core meets its retail heart and transport network, 400 George Street occupies a stretch of the city that has already adapted to those changing patterns. The 30-storey tower stands on a section of George Street transformed from a traffic-heavy artery into a pedestrian boulevard served by light rail, reshaping both the character of the precinct and how people move through it.
A redesigned lobby, cafe and expanded food offering sit alongside a new pedestrian route linking George Street with Sydney Arcade and Pitt Street Mall, drawing the activity of the surrounding district through the site itself. Shared meeting rooms, wellness facilities and upgraded end-of-trip amenities reflect the extent to which workplace, transport, retail and public space have become intertwined.
The building also sits within a market where the divide between prime and secondary space has widened sharply. In Sydney, the rental gap between those spaces expanded from around 30% in 2022 to a record 60% in the first half of 202610, as occupiers increasingly favour high quality buildings. With stock removals and demolitions expected to outpace completions over the coming years, prime rents are expected to rise further. Against that backdrop, repositioning assets such as 400 George Street can help future-proof buildings and capture demand where it is becoming increasingly concentrated.
Altogether, a modern office can no longer be understood solely as the space above its lobby, particularly when the rhythms of occupier attendance have become less predictable. The increasingly porous relationship between office buildings and their surroundings points towards a broader conception of workplace value. Rather than viewing the office as a self-contained destination, investors should consider how well it participates in the life of the district around it.
Altogether, a modern office can no longer be understood solely as the space above its lobby, particularly when the rhythms of occupier attendance have become less predictable.
The office’s second life
If the death of the office has been oversimplified, so too has the idea that all buildings share the same future. Patterns of work change, environmental standards tighten, housing pressures build and commercial districts evolve, creating different paths for different assets. 3 Avenue Hoche, One Vincent Square and 400 George Street follow different trajectories because the forces acting upon them are different.
The future of office real estate will therefore be shaped by more than vacancy rates or attendance patterns. Value will increasingly depend on recognising where demand is heading, and whether a building is prepared to follow it.
1 M&G Real Estate based on local broker reports, Q2 2026.
2 ImmoStat, ‘Market data’, (immostat.com), Juy 2026.
3 The second highest rating on the UK’s energy performance scale.
4 Real Estate:UK, ‘BPF research on EPC ratings and commercial buildings in the UK’, (realestateuk.org), February 2025.
5 Under France's Décret Tertiaire regulation, commercial buildings must progressively reduce energy consumption, with targets of 40% by 2030, 50% by 2040 and 60% by 2050, compared with a historical baseline.
6 ifo Institute, ‘European construction to grow by 2% in 2026’, (ifo.de), February 2025.
7 Eurostat, ‘Building permit index overview’, (ec.europa.eu), April 2025.
8 ORIE, ‘What to do with the millions of square metres of obsolete space in the French region’, (transformation-bureaux-logements.fr), February 2025.
9 CBRE, ‘FROM VACANCY TO VITALITY: Repurposing London’s secondary offices for housing’, (savills.co.uk), 2025.
10 JLL, as of Q2 2026.
The buildings referenced in this article are part of M&G Real Estate portfolios.
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