By Joe Easton | Bloomberg
A casual approach to desk allocation at work poses a risk to the market for office buildings, according to analysts at Morgan Stanley.
“Along with work from home, hot desking is one of the most structurally damaging headwinds facing the office market,” Sebastian Isola and colleagues wrote in a note to clients.
“Were it to be adopted more broadly, the reduction in floorspace requirements would likely have a considerable impact on occupational demand,” they said.
The property sector has suffered this year as interest rates have soared, while commercial and office real estate firms have been grappling with the shift toward hybrid working models.
Hot desking — the use of flexible work areas that aren’t assigned to specific employees — appears to be most prevalent in the UK, according to a survey conducted by the bank. Among UK respondents, 30% say it’s been introduced since the coronavirus pandemic versus about 20% in Germany and France and only 13% in the US, they wrote.
To be sure, the survey data suggests hot desking was also popular in Britain pre-Covid, the analysts added.
Still, despite informal desk policies and work-from-home practices in Britain, Morgan Stanley still favors London-focused office stocks. Occupiers are gravitating toward city-center locations that are rich in amenities, they said, keeping overweight ratings on Derwent London Plc, Great Portland Estates Plc and British Land Co. Plc.
All three stocks have suffered double-digit percentage declines this year, as higher rates fuel concerns about debt servicing costs and asset valuations.
