Industry – innovation leads the charge
While the lasting implications of the Covid pandemic will continue to influence the business landscape, structural shifts will significantly impact office market activity in the coming year.
3 minutes to read
The sources and shape of office demand were already changing ahead of the pandemic, with new working practices explored and new industries being born. This evolution will accelerate in 2023, presenting new challenges and instigating change to the constitution of office markets across UK cities.
Life sciences is a sector of predicted rapid growth, with its profile accelerated during the pandemic. A recent survey of over 100 UK life science and tech companies found that, on average, the companies interviewed expect to grow by 52% over the next three years. While the 'Golden Triangle' grabs the headlines, over 50% of Life Sciences employment is already outside this small UK area. Edinburgh has Europe's largest concentration of stem cell scientists at the center for regenerative medicine. Space and infrastructure to accommodate growth are also fundamental, with Bruntwood SciTech creating leading ecosystems enabling science and technology businesses to form, scale and grow.
The Science Industry Partnership projects that Life Sciences will need to fill 133,000 jobs by 2030. This trajectory will be a significant driver of occupier mobility as competition for talent intensifies. Therefore, the major UK cities' educational backbone will be fundamental. The partnering of the Manchester, Leeds and Sheffield universities to form Northern Gritstone is a prime example of cities creating the foundation to attract new business.
Technology is a sector with a broadening reach and a quick pace of change. Most will note that many global technology giants are beginning to reduce headcount to improve margins during a period of lower growth. But technology is subject to constant evolution. Innovation such as advances in artificial intelligence, augmented reality and virtual reality touches many industry types. UK gaming is a good example where experiences include learning and high-quality effects only previously used in the film industry. Clusters are growing, with regions such as the West Midlands registering over 130 companies producing 25% of all UK gaming output.
Aspects of these new technologies are also being applied in several industry sectors, with around 70% of global 2000 companies already using 'gamification' in some way. For example, companies like Oxford VR use immersive technologies to treat mental health conditions in the healthcare sector. Every industry type can now example a technology-driven angle (Med Tech, Ed Tech, Fin Tech etc.). Technology will undoubtedly, therefore, have the most significant influence on market demand - directly as a sector or indirectly as a sector derivative – in 2023.
The Climate Crisis will equally change the business landscape and business behaviour. New investment is forthcoming, and businesses are forming to help incorporate or cater to today's pressing social and environmental challenges. This response to greater global awareness has the potential to underpin substantial job growth and, therefore, new demand for office space. According to Bruntwood SciTech, the UK's transition to Net Zero will create more jobs in the Science and Technology sector than any other industry, delivering 65% of all roles – or some 365,000 jobs – by 2050.
The actions of the energy sector are a good example. Many major oil and gas companies are beginning to establish new-sub companies to service the projected demand growth for renewable energy. This is part of BP's £18bn commitment to the UK including expansion of its wind, hydrogen and EV charging operations. It's not just energy companies that are pivoting, though. Firms from traditional sectors are also responding, with new teams created to offer services such as green finance, consultancy, consumer choices, measurement and reporting. The latter has become a fundamental component of corporate reporting. This will only grow as attention gathers pace.
Clearly, all industries in 2023 will change. The supply side will need to be reactive and adapt to this new dynamic, with the creation of imaginative work spaces increasing in the quest to capture future business. In practice, this means flexible, collaborative, amenity-rich spaces with superior ESG credentials in locations that offer deep talent pools and strong connections to knowledge and research institutions. The next 'normal' is going to be very different.