Microeconomic effects of the Work-from-home evolution

Dec 28, 2023, 12:57 PM by Alex Homan-Russell

Work-from-home evolution - how has this affected the commercial property market and its links to pensions in the UK?


The unprecedented Covid pandemic of 2020, the ongoing digital revolution, and changing work-life balance attitudes have induced many businesses and their staff in Ireland and the UK to invest in remote working skills and infrastructure, introducing a new working practice. Looking at the UK, based on figures published by the Office for National Statistics in February 2023 almost half (44%) of UK workers now work from home either full-time or on a hybrid basis. Changes in working patterns, demographics, and environmental concerns were already altering the commercial property investment landscape prior to Covid. Some businesses are now reassessing their needs for extensive physical office spaces, as are their workers, about wanting to return to prior working practices.

 What are the implications?

The implications for the British commercial property market of this change in working practices is a contentious topic. As businesses and staff are embracing flexible working, the consequences are being felt not only in the commercial property market, resulting in a surplus of available office space, but also in pension investments, which is creating an intricate interplay between these different areas.

 Impacts to Pension Funds and Commercial Property

Pension funds are a vital part of the UK's financial landscape, having historically designated a sizeable percentage of their portfolios to investments in commercial properties, but the remote working shift has prompted pension fund managers to rethink their investment strategies, in terms of ROI and risk mitigation, due to the decreasing demand for traditional office space.

According to a Telegraph article from November 2023, Britain’s £1.3 trillion commercial property market could turn ‘very ugly very quickly’. Citi analyst Aaron Guy suggests that London City office values have fallen by as much as 26%. Occupancy rates are below 40% of pre-Covid levels and the recent bankruptcy of WeWork further highlights the potential emerging crisis. Commercial property loans, with a value of around £150bn, will soon be refinanced, which is problematic for pension funds and lenders; the Telegraph cites Bayes Business School remarking that there could be a funding gap of up to £37bn when these loans are refinanced. This is a grave concern when you think that 2-6% of UK pension funds (valued at £2.3 trillion) are invested in property assets. The article goes onto further explain that pension specialists are predicting an investor exodus from commercial properties – up to around one thousand pension schemes in the UK are considering a buyout, which is going to create a big problem, the extent of which could become very dire.

 Risk management and diversification

Pension fund managers are looking for ways to diversify their holdings in response to these changing circumstances. They are seeking to reduce the reliance on commercial property, improving resilience, and safeguarding the financial well-being of beneficiaries by combining a variety of assets, including those in industries less impacted by remote working.

Adapting to the new climate

As companies switch towards hybrid setups, the outlook for commercial property remains dynamic. Progressive commercial property owners are investigating adaptive methods, such as repurposing offices for mixed-use or flexible co-working. According to CBRE in October 2023, between the start of 2022 and the end of May 2023, around £1.3bn of Central London office stock had been bought with the purpose of converting it to another use, for example private housing, and another £700m worth of deals are under way. Central London has an office vacancy rate of circa 8.5%, representing around 20 million square feet of empty space and 28,000 homes could be delivered to the London market by repurposing this office space.


The work-from-home evolution is redefining not only the physical landscape of the commercial property market, but also pension fund’s investment approaches. The relationship between these two industries is complex and requires careful planning, diversification, and collaboration to keep them stable and growing in the changing economy. Whatever the outcome, change is on the horizon and the UK will need to adapt accordingly.

Brightwater Group, what we see on the ground here in Ireland.

From the work that we’re doing here at Brightwater Group, across all our divisions we can see that the landscape in Ireland has also been affected by the work-from-home evolution. According to an article in the Irish Times from August 2023, the workforce in Ireland has been the quickest in the EU to transition to hybrid working, with more than 25% now based at home most of the time. The result is that employers are now looking for quality over quantity in terms of office space creating a downturn in office space demand.

This shift to remote working has been a contributory factor for the increase in Irish house prices with the main cities like Dublin, Galway and Cork witnessing record level highs, making it increasingly difficult for first-time buyers to get on the property ladder. This has caused a large increase in rental prices, a surge in demand for rental property and a supply and demand issue, making it much harder to find affordable rental property. Ireland is the European hub for more than a thousand multinational companies and in terms of the Brightwater Group recruiting candidates from overseas this has certainly made the process for newcomers finding accommodation even more difficult.