Why do UK Real Estate Chief Finance Officers have their back-office teams in expensive locations such as Central London?

We’re special

During the pandemic, we all had to work from home and office life ceased for a large number of real estate back-office professionals. What followed was a rapid adjustment that proved business could continue remotely. Since then, while many companies have implemented a hybrid model with three days a week in the office, the essence of workplace use has changed significantly.

According to CBRE’s 2023 UK Office Occupier Sentiment Survey, average back-office occupancy across central London remains below 40% midweek, despite hybrid return-to-office policies. Many companies have shifted to rotating schedules or designated collaboration days, which often leave desks unoccupied for significant portions of the week.

The office is no longer just a place to perform tasks—it’s a hub for collaboration, innovation, and reinforcing company culture. This shift, combined with the growing influence of AI in automating routine and analytical roles, suggests that surplus office space is only going to increase. As roles evolve and some become obsolete, the need for traditional large-scale office setups diminishes.

It is also important to acknowledge the carbon cost of partial office occupancy. The three-day return model still maintains a sizeable environmental footprint, particularly in older buildings that do not meet current efficiency standards. This brings forward the need for adaptation: downsizing to central, more attractive and sustainable locations; repurposing older assets; and embracing flexible, tech-enabled work environments such as coworking lounges. These new workspaces reflect how people now use offices—as social, creative, and occasional gathering spots rather than fixed daily destinations.

Unlike other parts of the world, such as the US, where geographical distances naturally encourage distributed working and outsourcing, the UK has shown a noticeable reluctance to relocate or outsource back-office operations. There appears to be a general reticence to move services like property accounting to lower-cost centres within the UK or across Europe. This cultural and strategic conservatism contrasts sharply with global trends and adds to the pressure on centralised operations in high-cost urban cores.
 

It’s all too difficult

Despite the changes in working practices, UK firms have shown resistance to outsourcing back-office functions to more cost-effective regions, whether within the UK or Europe. This hesitation is frequently rooted in several recurring arguments:

·       We already outsource to our property/fund managers and see savings there.

·       We doubt offshore providers understand the specifics of our business.

·       Control must remain internal.

·       Our operational and jurisdictional complexity requires bespoke handling.

·       Technological transitions make further change risky.

·       Face-to-face collaboration still requires geographical proximity.

·       We have concerns about data security and offshore storage.

These are not trivial concerns, but they must be weighed against broader business pressures and future-readiness.

…but making money is not easy either

Ironically, these same organisations often express frustration with shrinking margins, recruitment challenges, and outdated systems. They acknowledge:

AI intensifies this dilemma. As automation becomes more capable of handling tasks once considered uniquely human, such as property accounting and basic analytical reviews, companies must re-evaluate where and how work gets done.

Actually, we don’t have to be that radical

The real turning point for UK office culture was 23rd March 2020. We discovered that with the right tools, remote collaboration is not only possible but, in many cases, preferable. This foundational shift opens the door to creative operational models. For example:

·       Leveraging regional UK hubs (e.g., Belfast, Manchester) with lower costs and growing talent pools.

·       Considering European cities with established Business Process Outsourcing (BPO) industries and regulatory compatibility.

·       Hybridising property teams between central and remote roles to preserve critical face-to-face interactions.

The UK office market is undergoing a major shift driven by changing occupier preferences and demand for high-quality, flexible workspaces. The number of active requirements for office spaces of 100,000 square feet or more reached a record high of 36 at the end of Q1 2025, indicating robust demand for high-quality office spaces in Central London (JLL). Post-pandemic, companies are encouraging employees back to the office, increasing the demand for prime office spaces that support modern work styles and employee well-being. However, limited new development since the pandemic has created a shortage of such spaces, especially in central London areas like Mayfair and St James’s. As of Q1 2025, UK office construction has dropped to its lowest level in a decade, with approximately 23 million square feet under development, down over 3 million square feet from the previous year. This decline is attributed to economic uncertainty, high costs, and elevated debt levels, leading developers to pause new projects (Financial Times).

At the same time, demand for serviced and co-working spaces remains strong, as firms continue to seek flexible lease options in response to ongoing global economic uncertainty. This is further reflected in the high levels of pre-letting activity across Central London. Of the 15.93 million square feet of office space currently under construction, 42% has already been pre-let, demonstrating a sustained appetite for high-quality, modern space even before completion. This strong demand is contributing to the scarcity of available premium offices and intensifying competition in the market (Cushman & Wakefield).

These trends are pushing landlords and developers to prioritize flexible, sustainable office solutions. Additionally, the scarcity and high competition for prime space are prompting companies to outsource non-core functions to regional or nearshore hubs, freeing up central office space and enhancing operational efficiency and resilience.

We’re perfect so don’t need to worry

Perfection, of course, is a myth. If your margins are solid, recruitment is seamless, systems run without friction, and your reporting is flawless, then perhaps you don’t need to change. But for most, operational challenges persist, and many companies find themselves making incremental improvements without ever tackling the core structural inefficiencies.

Actually, nobody’s perfect—so let’s be pragmatic

Perfection isn’t the benchmark anymore—resilience, adaptability, and foresight are. As AI reshapes entire job functions and hybrid models become the norm, the traditional case for holding large London office footprints is eroding. Companies are wrestling with empty desks despite enforcing three days a week in office, rising operational costs, and a growing awareness of carbon impact. In this context, continuing with business as usual—despite the evidence—is not just inefficient, it’s unsustainable.

This isn’t about making radical leaps, but smart, integrated choices. Relocating back-office functions to lower-cost centres, adopting more flexible workplace designs, and embracing technology-driven outsourcing can unlock not just cost efficiencies but climate gains too. And with surplus office stock growing, repurposing or retrofitting spaces in line with net-zero goals becomes both a challenge and an opportunity.

So perhaps the real question is: if we started with a blank page today, knowing everything we now know—how would we design our people, property, and platform strategies? Nobody’s perfect, but some decisions can bring us a lot closer to sustainable progress.

About the Authors

Partner in Strat-edgy LLP. Andrew has over 30 years of deep expertise leading transformational programmes involving Real Estate technology, organisational change, and business process improvement

Director at Strat-edgy with over 10 years’ experience in portfolio strategy, transaction management and capital projects.

Partner in Strat-edgy LLP. Claire has over 25 years of expertise in PropTech and ConTech, providing client-side advice for digital transformation, bridging the gap between business needs and technology solutions to drive