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Hot Desking: The Next Threat to the Office Market, According to Morgan Stanley

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Hot Desking: A Threat to the Office Market, Says Morgan Stanley

According to analysts at Morgan Stanley, the casual approach to desk allocation in the workplace poses a risk to the office market. Hot desking, the use of flexible work areas that are not assigned to specific employees, is seen as one of the most damaging headwinds facing the office market. If hot desking were to be adopted more widely, it could significantly reduce the demand for office space. The property sector has already faced challenges this year, with rising interest rates and the shift towards hybrid working models.

Prevalence of Hot Desking

Hot desking appears to be most prevalent in the United Kingdom, with 30% of respondents in a survey conducted by the bank stating that it has been introduced since the COVID-19 pandemic. In comparison, the introduction of hot desking in Germany and France stands at around 20%, while in the United States, it is only 13%.

Impact on Office Stocks

Despite the rise of hot desking and remote work practices in the UK, Morgan Stanley still favors London-focused office stocks. They believe that occupiers are still drawn to city-center locations with amenities, leading to overweight ratings on companies such as Derwent London PLC, Great Portland Estates PLC, and British Land Co. PLC. In conclusion, the increasing adoption of hot desking poses a threat to the office market, particularly if it becomes more widespread. The property sector is already facing challenges, but there are still opportunities in certain markets. The long-term impact of hot desking on office demand remains to be seen, but it is a trend that should be monitored closely.

The Hot Desking Trend: Implications for New Businesses

Morgan Stanley's analysis of the growing hot desking trend raises important considerations for new businesses. The casual desk allocation approach, which involves flexible work areas not assigned to specific employees, is reportedly a significant threat to the office market. With its higher prevalence in the United Kingdom and growing adoption in Germany, France, and the United States, hot desking could significantly reduce office space demand.

The Double-Edged Sword of Hot Desking

For new businesses, hot desking presents a double-edged sword. On one hand, it can lead to cost savings due to reduced office space requirements. On the other hand, it could limit options for office location and potentially impact employee satisfaction and productivity.

Navigating the Office Space Market

Despite the challenges, Morgan Stanley's preference for London-focused office stocks suggests that city-center locations with amenities remain attractive. This could be a strategic consideration for new businesses looking to attract talent and maintain a competitive edge.
Looking Ahead
The long-term impact of hot desking on office demand is yet to be seen. However, new businesses must stay attuned to this trend and adapt their strategies accordingly. While the property sector faces challenges, opportunities still exist, particularly in markets that offer desirable amenities and locations.
Story First Published at: https://financialpost.com/fp-work/hot-desking-threat-office-market-morgan-stanley
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