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Skyscrapers in the Canary Wharf financial, business and shopping district in London, UK.

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LONDON — London’s office market is in a “rental recession,” according to financial services company Jeffries, who reported that vacancies in the capital’s business hub had hit a 30-year high. 

Jeffries analysts estimated there had been a 20% contraction in London office usage as working from home and hybrid working, as well as a move toward green offices, continue to be a priority.

It said the level of vacancies was also above the tipping point at which rents would typically start to fall, apart from in the case of sustainability-focused buildings.

Flexible, co-working and serviced offices take up around 9% of London’s space and have moved into some of the vacant spaces, Jeffries said.

In the note, Jeffries downgraded commercial real estate companies British Land Company and Great Portland Estates as it sees the market continuing to shrink. 

Big-name companies have ditched London-based office spaces in their droves. Meta is the latest case, having paid £149 million ($181 million) to exit one of its offices in Regent’s Place early, as reported by British Land Tuesday, while British bank HSBC announced in June it would ditch its 45-floor Canary Wharf tower for a smaller space in central London, as seen by Reuters in a memo.

Morgan Stanley on the other hand opted to upgrade the stock of Great Portland Estates Tuesday, saying that U.K. real estate investment trusts “offer a compelling opportunity.”

The sector tends to do well toward the end of economic downturns, net asset value declines are moderating, and Bank of England rate cuts seem to be on the horizon, Morgan Stanley said, in explanation of its more positive outlook on the sector.

Shares of Great Portland Estates were down almost 4% around midday London time Wednesday, while British Land Company fell 2%.

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