The office sector has been viewed through a narrow lens, focusing on yields, rents, and return profiles. Recently, the conversation has shifted to hybrid working, utilisation, and the impact of artificial intelligence. However, this focus on short-term dynamics risks missing a fundamental shift: the role of the office is being redefined, emerging not just as an asset class, but as critical economic infrastructure.

The UK is a knowledge economy, built on sectors like financial and professional services, technology, life sciences, and creative industries. These sectors depend on the effective exchange of ideas, access to talent, and proximity to capital. High-quality office environments provide the platform for interaction, enabling collaboration, decision-making, and innovation. They perform a role as important to the modern economy as transport networks did in the industrial era.

The rapid advancement of AI has added a new dimension to this discussion. A common assumption is that more automation will reduce the need for office space. In reality, the opposite may prove true, at least for the types of space that matter most. As AI takes on process-driven tasks, the value of human input shifts towards creativity, strategy, and complex problem-solving. These activities benefit from proximity, unplanned interaction, and environments designed to bring people together.

We are seeing evidence of this in the behaviour of major occupiers. Headquarters are being reasserted as strategic hubs, not just places to house employees, but to coordinate culture, innovation, and decision-making. In many cases, functions that were previously distributed or offshored are being re-centralised, often supported by smaller, highly skilled teams working alongside advanced technologies.

However, recognising the growing importance of offices at a macro level does not mean that all office space benefits equally. What we are seeing is a pronounced and accelerating polarisation. Prime, well-located, amenity-rich buildings are performing strongly, with rents in core urban markets continuing to push upwards. These are the assets that align with occupier expectations around quality, sustainability, and connectivity.

By contrast, secondary stock, particularly in less accessible locations, faces a far more uncertain future. The combination of rising occupier expectations, tightening environmental standards, and elevated construction costs is creating a growing cohort of assets where refurbishment is challenging to justify. Some will be repositioned successfully, while others will transition to alternative uses.

This leads to an important nuance in the debate. While offices may be critical to the functioning of cities, they do not yet exhibit the characteristics typically associated with infrastructure as an investment class. Traditional infrastructure assets are defined by long-term, stable, often inflation-linked income streams. Office assets, by contrast, are increasingly operational in nature, with shorter leasing profiles, higher capital expenditure requirements, and a greater degree of income volatility.

For investors, this creates a more complex picture. Offices may be essential, but they are not passive. They require active management, ongoing capital, and a clear understanding of occupier demand. Policy and planning frameworks need to reflect the reality that offices are enabling infrastructure. This means taking a more integrated approach, recognising that the success of office space is intrinsically linked to transport connectivity, public realm, amenity provision, and the broader urban environment.

Cities that get this right will strengthen their competitive position. Those that do not risk falling behind. The debate around whether offices are "assets" or "infrastructure" is, in some respects, the wrong question. They are both, but in different ways. Economically and socially, high-quality office space is increasingly fundamental to the success of cities and the UK's position in a global marketplace. From an investment perspective, however, the sector is becoming more selective, more operational, and more complex.

Recognising this duality is key. Because if we continue to view offices purely through the lens of traditional real estate metrics, we risk underestimating their true value and underinvesting in the very spaces that will drive future growth. In a knowledge economy, the office is not an optional extra. It is infrastructure.

The implications of this shift are far-reaching. As offices become more critical to the functioning of cities, there will be a growing need for high-quality, sustainable, and well-connected spaces. This will require significant investment in new developments, as well as the refurbishment and repurposing of existing stock. It will also demand a more nuanced approach to urban planning, one that recognises the interdependencies between office space, transport, and other urban amenities. By acknowledging the importance of offices as infrastructure, we can begin to build a more resilient, more productive, and more sustainable urban environment. This, in turn, will help to drive economic growth, attract talent, and secure the UK's position as a global hub for business and innovation.