London has successfully positioned itself as a world-class innovation economy, with technology and creative clusters firmly established alongside the traditional financial, insurance and professional industry hubs. The capital has the vibrancy necessary to draw in all types of skilled workers, which in turn persuades new industries that they should locate in London.
The lesson of the last decade is that London must continuously attract firms and workers at the forefront of economic and technology change. Below are the firms and industries we see leading the next wave of innovation, generating future office demand.
01 BORN-AGAIN START-UPS
A growing trend is established companies wanting to re- introduce the start-up culture into their existing operations. Moving offices to a more vibrant district is often seen as part of the solution, as demonstrated by GE relocating its HQ from Connecticut to Boston. In a low interest rate environment, we see large corporations coming under shareholder pressure to invest their cash reserves, and demonstrate that they are re-inventing themselves to meet the challenge of tech disruption.
Several mature tech and media firms in London have already adopted the ‘born-again start-up’ strategy. However, with the digital revolution invading all aspects of life, we believe firms in industries not typically associated with Central London, like airlines and car manufacturers, will open innovation centres in the capital to stay ahead of the disruptors.
02 ROBOTICS AND ARTIFICIAL INTELLIGENCE (AI)
The next wave of the technology revolution is to be trail blazed by companies operating in robotics and AI, as testing continues on autonomous cars and commercial drones. With London already an established technology hub, we see robotics and AI start-ups favouring the capital, as computer simulation means more testing and development can occur in an office-type environment. Also, the regeneration of East London looks set to deliver affordable business space suited to these industries.
03 RAINMAKER LAUNCH PADS
Some legal firms in London have long operated ‘Mexican wave’ systems whereby a partner in London wins work, that is emailed to a junior member of staff in a regional office who does the actual drafting of documents. This allows the firm to leverage the access to clients and high value rainmakers in the capital, but with the lower operating costs in the regions. The approach could be applied to other industries.
Under this model, the London office does not lose its significance, but it will change in nature. There will be a move away from accommodating staff and desks, and towards offering meeting rooms and conference facilities, supplemented by hot desks and break-out space, for an office where the human traffic ebbs and flows. Such offices will need to be in a central location for the rainmakers to minimise their journey times between meetings; and provide an exclusive address for the letterhead. This could create a market for high quality and well located C-suites.
04 RE-CENTRALISING FINANCE
Fintech is leading the way in financial innovation. However, when acquiring new office space such firms are encountering higher rents in places like Shoreditch and Clerkenwell, as they compete against other tech industries for a diminishing pool of high quality space. Yet for fintech the long-term benefits of clustering with companies producing video games or phone apps is limited in scope, and there are potential benefits from being near to their finance sector customers.
This creates the logic of fintech forming its own cluster, with the City Core offering the advantage of bringing it into the finance world proper. Indeed we may see other tech sub-sectors breaking away to form new clusters nearer to client industries, e.g. media-focussed tech firms moving to Fitzrovia.
05 SCIENCE IN THE CITY
Scientific R&D has typically been associated with out- of-town business parks, particularly around Cambridge and Abingdon. However, recent years have seen hi-tech firms (another out-of-town stalwart) moving into London, as companies relocated to where talented staff wanted to live. Scientific R&D is similarly a people business. There is also an established research cluster in Bloomsbury, which should benefit from the redevelopment of Euston and King’s Cross as vibrant live/work locations. The Francis Crick Institute has opened a new life science laboratory in King’s Cross, partly due to the rail link to Cambridge.