The Future Commercial Property Market
In this years’ March Budget, George Osborne and The National Infrastructure Commission gave the long-awaited Crossrail 2 the green light with an £80-million-pound investment to help develop the project.
Alongside the current Crossrail 1 construction, which opens the main central section of the line at the end of 2018, by 2030 London will be more accessible than ever before. Improved journey times across the city, an increase in direct travel, and a welcomed ease in congestion to be seen across major London rail stations will be music to many commuters and businesses ears.
But what kind of impact will these transportation improvements have on businesses current office space and where they choose to trade from?
As it stands many businesses – especially in the financial sector – rely on being centrally located. Could transportation and other factors shake up the commercial rental market? Will we see costs balancing out across the city?
Predicting our future commercial property market, is not an easy task, especially in a market that’s ever changing. However, we believe a variety of factors raised in this article could have an impact.
Crossrail 1, the £15 billion 73-mile railway line currently under construction is one of Europe’s largest railway and infrastructure projects.
Services due to start in 2018 will run across London, extending out to Reading and Shenfield in Essex.
Although the overall project is expected to relieve pressure on existing London Underground lines such as the Central, District lines and the Heathrow branch of the Piccadilly line – there are reservations from some who believe we still need additional infrastructure to manage the extra capacity across sections of London transportation. Sir Peter Hendy predicts the Crossrail lines will be “immediately full” as soon as it opens.
Crossrail 2, the proposed new railway to serve London and the South East will connect National Rail networks in Surrey and Hertfordshire via new tunnels and stations between Wimbledon, Tottenham Hale and New Southgate linking in with London underground, London Overground, Crossrail 1 national and international rail services.
The new route aims to free up mainline rail routes into Waterloo and Liverpool Street terminals. Faster and more frequent journeys will be possible into London.
Lord Adonis told the Standard recently: “By the 2030’s, London will be a mega-city of more than 10 million people. Even allowing for planned investment and the imminent arrival of Crossrail 1, it will grind to a halt unless further significant improvements are carried out.
That’s why London needs Crossrail 2 as quickly as possible. It would help to relieve severe overcrowding across some of the busiest Network Rail stations in the country and on the most congested Underground lines and overground commuter routes.”
We will have to wait until 2030’s before the cross-capital routes are fully operational, and with such a time-gap if Lord Adonis and Sir Hendy predictions are correct, nervousness about over capacity in the capital could mean that commercial rents will remain at a premium.
So is there a short-term solution to businesses being priced out of the commercial market?
The average rent for office space in central London is £55.34 per sq ft. The demand for commercial West End’s property is also high and according to research by Savills, 27% of the West End’s three-year commercial development pipeline is already pre-let.
For small businesses and organisations looking to reduce their outgoings, renting office space in the capital isn’t sustainable. Many are moving out of the capital to areas like Hammersmith or South West London where rents are more reasonable. Time will tell if between 2019 and 2030 central London office space costs will balance out due to Crossrail 1 and 2 and improved travel connections.
But is transportation the only factor in the future market? We believe other factors may have an impact.
Technology in business
In a recent article technology in the future workplace, we interviewed our Workspace Analyst Lily Bernheimer. As part of the Social Trends Report written and researched by Lily, we identified that advancements in technology may have an impact on future office space.
Lily stated: “Technological innovation is transforming our working spaces, hours, and practices at an unprecedented rate of change. As technology for communication, collaboration, and organisation improves, flexible and distributed working will continue to grow. But these trends are countered by the need to have really high-quality spaces for face-to-face interaction when workers do come together.
Not only will these technologies have an impact on greater productivity, but the immediate and future effect of a new generation of workers is the need for a less traditional office space, a factor all businesses need to consider.”
Remote Working and Future Travel: How will that affect the commercial rental market?
Although Crossrail 1 and 2 will provide extensive infrastructure, will people still want to travel at the capacity they currently do for business?
Based on advancements in technology and cloud-based working, it appears there isn’t the same need as there once was for a 9-5 office-based culture. Within the same report and our interview with Lily covering technology advancements, we identified the daily commute to the nearest city is losing influence over residential choice, particularly London.
The model of going to work for one employer in a head office every day is also on the decline. There has been particularly strong growth in the number of people using their home as a base for work while working in a variety of locations: a 50.5% increase since 1998.*
With many people spending part of their week working from home or a local co-working space, head offices may not need so much space in the future.
Additionally, a new generation of workers will truly utilise the Crossrail 2 infrastructure and desire a more modern approach to working arrangements. International research found 56% of Millennials, especially those in the UK and US, preferred flexible working arrangements.
It’s very clear, based on the above findings, the requirement for extensive office space will be challenged in the future. Something businesses, agents, contractors and fit-out companies need to be mindful of.
As an Employers Agent, we work in support of agents and their clients to future-proof design. We work alongside our clients and their professional team, during the lengthy process and finer details of the commercial lease, while considering human factors and the building environment.
Our Time and Space Analysis is a systematic assessment of how workspace is used over the course of a normal working week. Quantitative methods such as behaviour mapping and decibel measurement are combined with qualitative data to present a picture of how fully a businesses space is being utilised.
These questions can include:
These can be crucial insights in collaboration with staff in the early consultation phase, helping businesses identify current needs and in years to come.
Rapport’ firmly believe, based on the above, that agents, consultants and businesses should collaborate at the very beginning of a project to future-proof their clients’ needs and reduce cost in the long term.
If you would like to speak with Rapport about any details in this article or your current workspace initiatives, you can contact us on; 01252 712590 or email us at; email@example.com
The data from this article comes via, the Tomorrow’s Home: Social Trends Report written and researched by Lily, in consultation with Robert Adam, Hugh Peter, ADAM Urbanism, Kurt Mueller, Grainger.*
Rapport’s business blog; shortlisted in the 2016 Surrey Digital Awards.