_Housing the capital's young workforce: The opportunities for developers

In a city weary of the tales of the long distance commuter, younger workers appear to be striking out on a different path. A third of those aged under 25 live less than 5km from their workplace; a substantially greater proportion than their older colleagues.

Not only do younger workers live closer to their place of work, but research by Eric Klinenberg in his book Going Solo, confirms what many of us might have already suspected – that today’s young workforce is spending an increasing amount of their free time at work.

The younger workforce accepts the need for, and is more prepared to learn, a variety of new skills.

This attentiveness is partially down to the speed of change in the modern workplace. Klinenberg believes that fast growth and ncreasing competition mean that professional advancement is partially dictated by an individuals' commitment to their work.

Rapid change looks set to remain with us

If we look at the largest employment sector in London, financial and business services, even this mature sector has seen employment grow at 2.6% each year over the past decade compared to the 1.6% London average.

According to Oxford Economics, the same sector is expected to account for 40% of the nearly 900,000 new jobs expected to be created in London over the next decade.

The impact of this change is being seen in employee behaviour. The priorities of millennials today appear to be very different from the priorities of their parents when they started work. According to Klinenberg, the younger workforce accepts the need for, and is more prepared to learn, a variety of new skills.

There is also a desire among workers to retain flexibility in their lifestyle and to be able to re-locate for future employment opportunities, which has been borne out in the Knight Frank Tenant Survey.

This desire for flexibility, as well as a requirement for affordability, is helping support the growth in demand for privately rented accommodation in London, and in many urban centres across the UK.

Apple plans to consolidate all of its London office space into the Power Station at Battersea comprising a mixed-use redevelopment arranged over 42 acres. The move was driven by a number of business-related factors, including the building’s iconic status and space, Zone 1 location and transport connectivity.

Source: Knight Frank Tenant Survey 2016/2017

The building’s proximity to the surrounding residential development, both on the Battersea Power Station Estate and wider Nine Elms regeneration area, was also a pull factor by potentially providing residences for local workers.

Google also plans to consolidate all of its office space at King’s Cross. Again, this is another regeneration area where new residential developments could potentially provide residences for employees who will work there. Tenants’ desire for flexibility and proximity to employment centres is driving demand.

This process creates an obvious opportunity for developers. However, the risk for those considering large-scale private rental development is in not understanding tenant requirements in detail.

Through Knight Frank’s Tenant Survey, we have focused relentlessly on understanding this specific question. The results showed that tenants would consider paying additional rent for amenities such as an on-site gym, en-suite bathroom and weekly cleaning.

Private renters tend to choose smaller properties than owner occupiers. Their desire to be close to work and spend time in a productive way, whether working or socialising, means that private renters in employment will prioritise the location over size.

Trends identified in the Knight Frank Tenant Survey have already been recognised in cities such as New York. There, the city authorities held a competition in 2013 for a new housing model that would be able to help New York’s growing number of “small households”.

Source: Knight Frank Tenant Survey 2016/2017

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The winner developed a scheme whicH is today known as Carmel Place, located between East Village and Midtown Manhattan. This development is comprised of 55 small residential units, ranging in size from 250 to 370 square feet, with nine to ten-foot ceilings, as well as balconies. It is fully let and has revealed strong demand for compact homes.

Currently, more than half of all residencies in Manhattan are one-person units. Based on the 2011 Census, this proportion in Central London is at around 38% (i.e.studios and one-bedroom residentialunits). The density of one-person units is slightly higher in the private rented sector, at 45%.

The requirement among young workers to live centrally in cities in order to retain flexibility of tenure, and to access truly affordable rented accommodation, is clear. The opportunity for developers is in understanding the requirements of this growth market.

For city authorities there is an equally big prize in attracting talented workers - supporting the urban economy for the benefit of all.

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The Central London office market is currently undergoing a period of significant change – but with big change comes great opportunity. Our latest report provides occupiers and investors with thoughts and guidance for the year ahead as the Central London office market continues to shift.

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