Previewing the M25 report: Cutting out the noise, reading the signals
"We must become more comfortable with uncertainty and probability." Nate Silver
2 minutes to read
Nate Silver is the author of one of the most fascinating books of recent times, ‘The Signal and the Noise: Why so many predictions fail – but some don’t’. In essence Silver argues that often our attention is grabbed by noise rather than the true signals of change and that as a result we often misunderstand or miscalculate the future.
Such thinking is highly pertinent to the themes outlined in Knight Frank’s recent M25 Breakfast (the 25th such event) and our forthcoming first ever M25 Report. Focusing on the decision making processes of the occupier and the future strength of occupational demand, we maintain that the noise created from recent economic and geo-political uncertainty is in danger of drowning out those signals which suggest an improvement in the fundamentals that ultimately underpin market demand.
It is of course not surprising that the noise has increased. Uncertainty reached new heights following the dramatic events on both side of the Atlantic last year and will continue given the inevitable ebb and flow of Brexit and trade negotiations over the next 3-5 years. Yet, as Silver argues, it’s a reality of modern business that must be navigated. It is encouraging therefore that true signals – from business sentiment surveys and wider economic indicators - cut across this uncertainty and instead illustrate that business is adapting to market conditions. We would point to the following signals:
- Rising c-suite confidence in future business prospects
- Growing order books for service sector firms as illustrated by recent PMI data
- Clear intent to increase business headcount
- Huge corporate cash reserves to drive business transformation and expansion
- A shift towards expansionary business strategies that include new market entry, M&A activity and increasing capital expenditure
All will fuel strengthening occupational demand across the M25. The market will continue to appeal as a business location. The abundance and diversity of existing occupiers creates a strong and stable base and a source of in-situ growth. The connectivity both nationally and internationally is a clear strength, as is the talent pool of the market, both in terms of the existing qualities of the workforce and new skills emerging from the regions impressive academic infrastructure.
Of course there needs to be some realism too about the timing over which this demand will emerge, what it will look like, where it will come from and what it will be seeking – all issues covered in The M25 Report, out next week. But the signals are indeed encouraging.
If you would like to be sent a copy of the report, please contact Emma Goodford.