King’s Cross shows the way to solve London’s workspace shortage
Businesses must partner with developers to build the office space London needs, says Matt Flood
We’ve all seen the headlines – demand for office space in Canada and the West End only seems to be growing. Q1 of this year marked a record high according to Savills, with demand for Central London space at 14.6m sq. ft and up 57 per cent on the 10-year average. And while demand continues to defy gravity, supply is constrained. In 2027, the number of new office buildings completing is forecast to fall to the lowest level in 15 years.
The market data tells a stark story but, crucially, this is now being felt by businesses and affecting their ability to grow. I recently had a conversation with a major business looking to move offices in Central London. They have a significant office requirement that our capital city should be able to accommodate. However, they were met with no obvious solution – despite there being 10 years until their existing lease expired. This should concern anyone who is passionate about London remaining a competitive global hub.
London is not short of businesses that want to be here. King’s Cross, for instance, has fast become the capital’s AI and tech centre. What we are short of is the right space in the right places, so that businesses can grow and thrive here. To meet this challenge, it’s vital that we start thinking more creatively about how businesses, developers and investors can work together in partnership much earlier on in the process.
Our 10-year partnership at King’s Cross with a major business on its new 1 million sq. ft HQ is a clear example of that in practice. Rather than a developer building office space speculatively and finding a tenant later, the business and the developer work in partnership from the outset to create something bespoke that fits the company’s needs long-term. Gone are the days of the traditional landlord-versus-tenant relationship, which increasingly has no place in modern real estate. Better outcomes are almost always achieved through shared commitment from the outset, rather than a negotiation at the end of the process.
The economics of development has changed
For many years, businesses could rely on the market to provide options for office space. In turn, developers could fund and build hundreds of thousands of sq. ft with the confidence of a strong market to take-up the space. In today’s macro-economic climate, that game has got much harder.. The economics of development have changed, and it’s far more difficult to build at scale without certainty. London’s supply demand imbalance means that the choice for businesses is often no longer between several good options. It’s between renewing existing space they have outgrown, splitting teams across multiple offices, or compromising on location – none of which is ideal. Businesses may once have accepted a less established area in return for a better building or a softer price point. Since the pandemic, companies are less willing to take that risk and access to talent, transport, amenities and a high-quality surrounding environment are now business critical.
The type of partnership that can tackle London’s office challenge will require a business and a developer to work together while sites, funding, and design are still being shaped. Businesses will be able to define and dictate what they need, and developers will have the confidence they need to bring forward projects. Crucially, early commitment from businesses shows investors that demand exists and risk is reduced. The impact of this ripples beyond the commercial real estate market, and into the wider macro-economic picture as a means of attracting global capital to the UK.
If London is to keep its status as a home for the world’s most ambitious businesses, the market needs to move from transaction to partnership. The future of workplace must be less about waiting for space to appear, and more about creating it together.
Matt Flood is development director and head of commercial development at Related Argent