Lawyers in Midtown, hedge funds in Mayfair and government departments in Victoria; for decades business sectors have been wedded to certain postcodes, submarkets and even streets. Whilst this has been slowly changing over recent years, the current pace is expected to step up a notch, as tenants are now more open-minded about their next workplace than ever before.
FORCES OF CHANGE
So, what has changed? Primarily the proliferation of new technologies has been the biggest factor of change in the workplace, specifically the growth of technology that creates a truly connected workforce. The ability for people to work anywhere, at any time, has caused a re-imagination of the office and the role it plays. This technology revolution has changed people’s expectations of working practices, meaning the workplace is having to adapt. As a result, tenants are becoming ever more open to the type of space that they will operate from.
Secondly, the workforce itself has changed. A wide range of ages in the office means a more complex and thoughtful approach to providing the right kind of working environment. This is exaggerated by very different jobs that are now being performed. The office and its immediate environment has a vital role to play in helping businesses to attract, engage and retain talent. In a period of low unemployment and uncertainty regarding access to and availability of overseas talent, businesses are now more than ever cognisant of the fact they should use everything in their power to position themselves as a great place to work. So innovative spaces, thought provoking buildings and the ability to create unique spaces are high up on the menu for prospective tenants. With so many tenants having to address the same operational challenges, the issues become restricted by availability. Simple supply and demand is forcing some todo the unthinkable and cast the net wider.
PIONEERS OF NEW MARKETS
The boundaries of London’s office market have grown over the past 25 years as new development has rippled westwards to Paddington, eastwards to Canary Wharf, north and south with King’s Cross and Southbank respectively. 2019 will see those boundaries push further out as regeneration, and improving transport links crystallise. Stratford and the Olympic Park is gaining leasing momentum. So too is White City, whilst office construction continues in Nine Elms and Battersea. The areas in between those emerging submarkets are also attracting developers, landlords and serviced office providers and ultimately tenants. They present the chance for companies to be pioneers. Whilst for some this could be a daunting prospect, the opportunities that these parts of London offer such as financial incentives, larger or more interesting buildings and access to local talent, could represent an operational advantage.
Corporate uncertainty has been up and down over the past couple of years, and hasn’t really recovered since the global financial crisis (2007-08). According to the Deloitte CFO Survey the level of that uncertainty rose sharply in the third quarter of 2018 to its highest reading since December 2016. Close to half of all CFOs believed uncertainty to be high or very high. However, despite taking a defensive stance, CFOs have an expansionary outlook with a keen eye on cost reduction and efficiencies. As a result, businesses have sought to be more agile, less hierarchical and more inclusive of the worker. That attitude is increasingly extended to real estate decisions. Flexibility in every sense of the word from the way in which space is obtained, leased, designed, used and ultimately who feeds into those decisions is being sought. A contingent workforce is unsurprisingly being met by a contingent space need.
The mass rollout of the flexible workplace offering from a growing number of providers is giving businesses just that flexibility – from a space, location and cost perspective. 2019 will see more businesses committing to the idea of flexible offices. While traditional considerations for space will continue to exist, requirements are changing and the year ahead will see the tenant voice being heard a lot louder than before as normal practices are disrupted and challenged.