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In 10 - Does the UK Office Have a Future?


As the UK gears up to head back into the office, Ben Wood and Suzima Abu-Zarin, co-managers of the LF Canlife UK Property ACS, discuss the future of the office sector after Covid.

Offices currently make up about 55% of the LF Canlife UK Property ACS. What role do they play in a property portfolio?

With the LF Canlife UK Property ACS we are providing a one-stop fund that investors can use for diversified UK core and value-added property exposure. We see offices as having two main functions in the portfolio – to provide yield (the Fund has an initial yield of 5.52%[1]) and also capital appreciation from active management such as renovation, improvement and lease management to increase rental value potential.

How would you describe the types of office assets in the LF Canlife UK Property ACS?

We are able to use the UK office sector to gain exposure to many different parts of the UK economy. We generally have a focus on the London and South East office markets, as that’s where more than 40% of UK GDP is generated. Most of the offices we hold are city centre multi-let assets located either in the London, South East or ‘Big 6’ office markets (Birmingham, Bristol, Edinburgh, Glasgow, Leeds and Manchester).

A second strand we focus on is offices in ‘knowledge centres’. These are cities or towns that have strong links to universities or world-class science and research institutes. They tend to be economically dynamic areas with ongoing innovation, high employment, higher incomes and good growth potential.

Do you expect offices to be a key part of the portfolio over the long term? 

Yes, certainly. Despite recent debate about WFH versus the office, it’s clear that offices have a future as places where people work, meet, collaborate, generate new ideas, focus on the business of business and instil corporate identity. We are social animals, and offices provide a level of interaction that you can’t substitute with remote working.

Will Covid change the way that we use offices, or will we all return to business as usual?

It’s too early to say. Surveys suggest that more people will take the opportunity to work from home after the pandemic, at least for part of the time. Having fewer people working in offices for a full five-day week could mean that the supply of office space will exceed demand over the long term, especially in secondary markets.

We believe there’s still a place for well-specified offices in the age of increased agile working, but occupiers need a reason to return to the office. This reason is provided through better quality space with strong wellbeing and sustainability credentials.

Instead of basic workspace provision, we’ll probably see more generous open spaces, better meeting areas, hot desking systems, wellbeing facilities and more technology, such as videoconferencing facilities, along with ease of access for their workforces and leasing flexibility.  Therefore, prime buildings in strong city centre positions will remain in high demand.

Overall, offices may become more tailored for their occupiers. That will call for more engagement between landlords and occupiers, and landlords will need to have good asset management capabilities if they are to provide what occupiers are looking for.

Can you share some examples of what ‘wellbeing’ features are likely to be in offices?

Wellbeing features can cover a range of things but they are broadly anything that makes for a more pleasant and healthy environment for work environment, and thereby enhances productivity. That can include access to better ventilation, natural lighting, collaboration space, food facilities, concierge services, cycling facilities, showers and design that creates a sense of space and calm. Having a great work environment can reduce employee turnover and increase tenant satisfaction and retention.

Which areas of the office market are likely to perform best over the coming years?

Occupier demand is likely to be centred on the best quality grade A offices available in city centres in the South East of England, the Big 6 cities and well-located and connected suburban hubs. Some regional city centre offices are likely to offer particularly good value as a result of the current government’s levelling-up agenda.

ESG is becoming a central issue for investors. How does it affect the offices in your portfolio?

Sustainability is one of the biggest themes in property investing, and one that will continue to play out over decades. We consider ESG factors at all stages of the investment lifecycle, from acquisition to disposal, and have a well-established Environmental Management System, which we use to monitor and minimise environmental risks in property portfolios.

We have a policy to only invest in new acquisitions that meet strict ESG criteria or have the potential to be improved so that they meet our ESG standards. By way of an example, we target an Energy Performance Certificate rating of C and above, but our ESG standards extend way beyond energy efficiency and include air quality, sustainable building materials, water usage and longevity, among many other things.

The LF Canlife UK Property ACS has been Global Real Estate Sustainability (GRESB)[2] benchmarked for more than two years now. In the 2020 GRESB Survey the fund was ranked 4th out of 14 in the UK Diversified Office/Retail non-listed segment, and it was awarded a GRESB three-star rating.

Are there any offices in the portfolio that stand out as being ‘future ready’?

We are really proud of the refurbishment work carried out by our Property Asset Management Team at Forbury Square, an office in Reading. It’s a great example of how it’s possible to produce a better working environment with a focus on health and wellbeing.

As part of the refurbishment we installed indoor air quality monitoring equipment to track humidity, carbon dioxide, dust and chemical levels. All monitoring data from that is shared with the occupiers alongside other sustainability and wellbeing tips through our tenant handbook. We also installed an array of PV cells and new air-handling units to enhance the building’s energy efficiency and performance rating. The building has also been Fitwel[3] assessed with further wellbeing ideas added to the design. We are already seeing the benefits of this through increased occupier interest and achievement of higher rents in lettings.

We are currently looking to redevelop an office building on Clarendon Road, Watford. We are aiming to provide a best-in-class building in the town centre with a BREEAM rating of Excellent, a WELL Gold rating, an EPC rating of A and a Platinum WireScored rating.[4]

What have you bought and sold recently, and why?

The Fund recently bought a city centre office building in Manchester. The building has excellent transport connectivity but needs investment in order to reach its full letting potential. We intend to refurbish the building in order to reposition it to provide flexible, modern office space that suits the emerging agile working environment.

Are there any new trends in the office sector that are worth watching?

Flexibility shouldn’t stop at what a building offers in terms of specification, local amenity and connectivity. Landlords need to be more receptive to occupiers’ needs. As we emerge from the global pandemic, many businesses require flexible leasing options that do not tie up significant amounts of capital.  Landlords need to offer a wider range of leasing options, such as fully or partially fitted office suites, serviced office contracts or even short or flexible lease durations.



Important Information

Past performance is not a guide to future performance. The value of investments may fall as well as rise and investors may not get back the amount invested. Income from investments may fluctuate.

The information contained in this document is provided for use by investment professionals and is not for onward distribution to, or to be relied upon by, retail investors. No guarantee, warranty or representation (express or implied) is given as to the document’s accuracy or completeness. The views expressed in this document are those of the fund manager at the time of publication and should not be taken as advice, a forecast or a recommendation to buy or sell securities. These views are subject to change at any time without notice. This document is issued for information only by Canada Life Asset Management. This document does not constitute a direct offer to anyone, or a solicitation by anyone, to subscribe for shares or buy units in fund(s). Subscription for shares and buying units in the fund(s) must only be made on the basis of the latest Prospectus and the Key Investor Information Document (KIID) available at

The LF Canlife UK Property ACS is an Authorised Contractual Scheme and is suitable for institutional and professional investors. The fund invests in assets that may at times be hard to sell. This means that there may be occasions when you experience a delay or receive less than you might otherwise expect when selling your investment. For more information on risks see the prospectus and key investor information document.

Requests for redemptions of units are subject to a notice period of up to 185 days. In normal market conditions this notice period is waived at the discretion of the manager and units can be sold without giving notice.  The value of property is generally a matter of a valuer’s opinion rather than fact. Costs of buying and selling real property are generally much higher than for other types of assets. Property investments may be subject to significantly wider price spreads than bonds and equities which could affect the valuation of the fund by up to 8.00 %.


Canada Life Asset Management is the brand for investment management activities undertaken by Canada Life Asset Management Limited, Canada Life Limited and Canada Life European Real Estate Limited. Canada Life Asset Management Limited (no. 03846821), Canada Life Limited (no.00973271) and Canada Life European Real Estate Limited (no. 03846823) are all registered in England and the registered office for all three entities is Canada Life Place, Potters Bar, Hertfordshire EN6 5BA. Canada Life Asset Management Limited is authorised and regulated by the Financial Conduct Authority. Canada Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.

CLI01913 Expiry on 15/07/2022

[1] Source: Canada Life Asset Management, as at 10/05/2021

[2]Global Real Estate Sustainability Benchmark (GRESB) is an investor-driven organisation that was launched in 2009. It gathers data on the performance of Environmental, Social and Governance (ESG) global assets to enable standardised and validated comparisons.

[3] Fitwel is a global certification body committed to promoting and assessing healthier buildings, workspaces and communities.

[4] BREEAM is an international scheme that provides independent third-party certification of the assessment of the sustainability performance of individual buildings, communities and infrastructure projects.

The International WELL Building Institute (IWBI) is a public benefit corporation launched in 2013. Its mission is to improve human health and wellbeing through the built environment.

WiredScore assesses, certifies and improves digital connectivity and smart technology in homes and offices.