According to Savills latest London Mixed Use Development Spotlight, as employers and employees alike demand more from their workplace and their work / life balance, London’s outer borough’s could reap the benefits by providing greater flexible office space and affordable homes at a variety of price points.
The report suggests that, more than ever before, London office workers are looking for shorter commutes and demanding more from their workplace in terms of who they work with (sharing ideas / networking) and where they work (access to green space, retail, leisure and wellness). Savills says this shift could present a huge opportunity for the less congested outer London boroughs.
According to Oxford Economics, employment in sectors that tend to occupy co-working spaces is set to rise by 20,000 people in the outer London boroughs over the next five years, which equates to a gross additional need of 1.6 million sq ft (148,644 sq m) of office space. However, Savills notes that only 707,000 sq ft (65,682 sq m) of new offices are planned in this area during the next four years. The majority of which are tailored towards pre-lets with large corporate occupiers, pointing to a potential dramatic shortage of office supply. In addition, with substantial business growth forecast among SMEs whose working culture best suits co-working spaces, there is a specific need for more types of this space in the outer boroughs, says Savills.
Piers Nickalls, director in the business space team at Savills, comments: “In order to accommodate London’s future growth, landlords, developers and planners need to ensure that a full range of workspace at different price points is available across the city. The outer boroughs can offer occupiers far shorter commute lengths than what many take as the norm when travelling to work in central London, however, this should not be their only USP. The most successful emerging London sub-markets will be able to harness innovation and deliver a full range of flexible spaces and tenures, including co-working, to create thriving business eco-systems outside of Zone One.
Furthermore, whilst London has proven resilient in the aftermath of the EU referendum, there is likely to be a sustained period of uncertainty during the forthcoming negotiations. Business decisions, however, will still need to be made and the outer boroughs should cater for office occupiers who will be looking for more cost-effective and flexible real estate options that allow them to adapt swiftly to events.”
From a residential perspective, Savills says in order to meet strong demand from the city’s growing workforce, more affordably priced homes are needed. Whilst leading indicators show that 2016 saw 41,000 homes completed, the highest since the 1930s, current delivery does not match the shape of demand in lower-priced markets. Savills estimates that 58% of demand is for homes costing less than £450 per sq ft (£4,844 per sq m), however only 15% of the five-year build forecast is expected at these values.
Katy Warwick, head of Savills London residential research, adds: “There remains no room for complacency, as numbers remain a long way short of the 64,000 new homes per year required to support forecasted employment growth. Ultimately, policy intervention is required in order to reach the level of development needed as well as shifting the focus across to the lower-value markets. Going forward, the London mayor must make best use of his devolved power to bring together housing, transport and infrastructure to provide the homes and workspaces needed for London to flourish.”