West End shake-up

The West End demonstrates well how the sector in which you work is increasingly less likely to determine the geographical location of your office. The largest West End deals in 2015 were not by financial and banking companies as might have been expected previously but rather media and technology businesses Facebook, Google and Universal Music.

Banking and finance nonetheless remains a strong source of take up in the West End – the industry accounted for 32% of lettings in the area in the final quarter of 2015 for example, according to Gerald Eve. But while the West End continues to grow as an alternative location for banking and finance, these firms are no longer concentrated in the core West End and are taking space at a growing rate in the wider West End.

They are eschewing Belgravia, Covent Garden, Mayfair and St James’s in favour of fringe locations, such as Euston, Fitzrovia, King’s Cross, Marylebone, Paddington, Soho and Victoria. Both Deutsche Bank and Jupiter Asset Management have taken space recently in Victoria, for instance.

Meanwhile, in Q1 2016 the core West End Core office markets of Mayfair and St James’s experienced what Colliers International called: ‘Inhibited activity with headline rents plateauing… and demand for £120 per sq ft plus space at a 12 month low’. Pre referendum pauses in decision-making may not be the sole reason for this.

In further evidence that companies no longer cluster based on what they do, the West End fringe is attracting businesses across a variety of sectors. One of the largest deals of the first quarter of 2016 was retailer New Look taking an off-plan pre-let in King’s Cross while last year Nokia and Microsoft announced plans to move to Paddington.

War on talent

This disregard for the old order is largely because employers are becoming increasingly concerned about recruiting and retaining the most talented people. Last year an annual Chartered Institute of Personnel and Development survey of 520 British companies across sectors revealed that three quarters were experiencing increased difficulties recruiting staff.

It has simultaneously become clear that employees’ wellbeing promotes both retention and productivity, and a key element of wellbeing is an easy journey to work. A survey by OnePoll last year found location is the most important factor keeping British workers in their current roles, ahead of both wages and job security: 57% stay in their job because of the location. 

In addition, what’s inside the office now matters much more than where it is. Most of us are now familiar with the workspaces created by the likes of Google and Facebook. Offering delights ranging from free food to fashionably styled break-out areas that employees can configure to their own preferences, these are places designed to attract employees while inspiring lateral thinking and entrepreneurialism.

Indeed, the information-sharing age fuelled by these very companies means we are more likely to know how other people’s offices look and hence have stronger views on what we want from our own workplace. In addition, the much-admired media tech model of an office has ‘grown up’ somewhat, making it more feasible for other sectors to emulate. The almost notorious gimmicks such as AstroTurf and slides to transport you between floors have faded while emphasis has grown on workplaces that foster efficiency and wellbeing.

A stream of media pieces with headlines like ‘Where We Wish We Worked’ attests to just how widely aspired to the Google style of office has become. And the aspiration can be seen above all in the tech-immersed and personal image-focused Millennial – which is significant given that the future of all industries depends on this generation.

Google recently upped the ante with a mind-boggling array of attractions at its headline-grabbing new King’s Cross headquarters such as a running track, complete with the option of a post jog massage no less. So the pressure is on other sectors to keep up, especially because, with the death of the job for life, if we don’t like our office we may vote with our feet.

Conclusion

The fight for talent is largely why businesses no longer cluster by sector then. But the trend is further enabled by technology allowing us to communicate remotely with ease, reducing the need for offices to be based within walking distance of fellow sector participants. The tendency to take shorter leases, too, allows business to take a risk on an area without committing to that location for too long. 

As employers scrabble to provide the ‘experience’ employees require, there is a degree of homogenisation in the interiors of workplaces across sectors. At the same time, there is fragmentation in location choices as businesses select offices based the ability to deliver wellbeing and, essentially, an appealing ‘lifestyle’ for employees. Hence the migration of companies to diverse locations with great transport connections and attractive new places to eat, drink and spend time, such as Victoria, King’s Cross and Farringdon.

Asset managers and developers must therefore create developments in terms of such micro-level qualities rather than building the scheme based on a traditional sector stomping ground. Successful workspaces should be contemporary – which now means flexible, healthy and inspiring – and located in neighbourhoods that are accessible and attractive from a ‘lifestyle’ perspective.

Looking ahead, while the old habit of clustering based upon sector disappears, will we see the geographical gathering of businesses with a like-minded view of what their workforce wants from the workplace? This may well be a trend to watch out for.