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_A New Occupier Philosophy

After the most tumultuous twelve months since the global financial crisis, it is perhaps time to be philosophical about the prospects for the Central London office market.
February 07, 2017

Faced with on-going technological disruption, businesses of all sizes and industry sectors have a pressing need to reinvent themselves. Business models are being re-set, new teams are being established to boost new operational reality, collaboration is being nurtured, and technology is being applied to drive transformation.

Central London take-up rallied in the final quarter of 2016 with 3.6 m sq ft transacted – some 14% above the long-term average. Firms such as Apple, Amazon, Wells Fargo, and WeWork all committed to London despite the uncertain backdrop. 

At the end of 2016 Knight Frank was tracking 8.6 m sq ft of active searches – higher than average and notably above the same point in 2015.

The characteristics of that demand are changing in four notable ways:

  1. Central London office demand is shifting away from finance and towards tech and creative industries, driving with it the reinvention of the city itself as a global tech hub. 
  2. Occupier demand is becoming more flexible in terms of location and required lease structure. Lease flexibility is also important and occupiers are acknowledging the ‘premium’ required to secure it – for many it is a price worth paying in a disruptive business environment. 
  3. New technologies such as automation, robotics and Artificial Intelligence (AI) will shape demand via a simple questioning of just what is the purpose of the London office. Nowadays, for large international firms, the London office performs the role of a key global hub office. 
  4. The war for talent continues, and the role an office can play in attracting and retaining the best people has never received greater focus. 

While it is easy to form a gloomy outlook for occupational demand amidst an unpredictable macro environment, the reality is that businesses urgently need to restructure and future proof themselves. This will drive demand, for as Nietzsche once said “the future influences the present just as much as the past”.

Written by Lee Elliott, Head of Commercial Research and, Richard Proctor, Head of Central London Tenant Representation