The employment profile of the City of London has been changing over the past decade. While financial services still remain the key driver of City of London output, disruption in office occupation is being influenced by tech and other service sector occupiers, embracing commercial property within the square mile itself.
Even in the wake of the credit crisis in 2010, financial services in the City still accounted for 42% of employee jobs. That ratio has been diminishing steadily since then with forecasts for financial employment suggesting that city based ‘financial’ jobs will only represent 32% of total City of London employment. In real terms, Financial employment has actually increased since 2010, rising by 20,000 or 8%. However, City jobs growth of over 100,000 new jobs since 2010 demonstrates that the balance of City of London employment is showing a strategic shift.
Regardless of the ‘vote to leave’ result, this strategic shift in ‘tenant profile’ was a force majeure. It has come about due to margin squeezes for major banks in the prolonged low interest rate environment, necessitating reductions in overheads (property commitments, headcount etc.), coupled with the rise of ‘tech and media’ and the footloose nature of that sector’s occupational needs.
Certainly, financial services headcount is set to fall in the next five years and beyond, but demand from other emerging sectors looks likely to more than compensate for any shortfall in demand from or divesting of by major banks. Over the next decade London, as across the wider UK, will experience a shift towards a more knowledge-based economy and subsequent demand from media, tech and professional services sectors. The gap between these sectors and pure finance is set to close markedly in the City over the next five years with media, tech and professional services combined accounting for 38% of City jobs by 2030, compared to 31% in financial services.
Current anecdotal estimates of staff relocations for JP Morgan, Barclays Morgan Stanley, Goldman Sachs, UBS and HSBC are running at 8,650 jobs or the equivalent of close to 700,000 sq ft. While these are set to be at higher levels than forecasts currently suggest, these losses should be more than compensated for by acceleration in demand from tech and professional services. Info/comms and professional/technical (which includes management consultants, lawyers, advertising/PR and engineering) will need up to 2.5 million sq ft of additional space up to 2030 in order to satisfy the levels of forecast employee growth.
Repositioning of existing office stock will come increasingly to the fore, with a prime example being Aermont Capital’s One Poultry, EC2. This is set to undergo a renewal program with increased ceiling heights, cycle parking and new leisure offering. The scheme will be specifically aimed at tech and media occupiers. The building is in prime location facing as it does Bloomberg’s new HQ, a prime example of the strategic shift taking place within the square mile.
The London office market continues to evolve, in terms of occupier perceptions of geography, amenity and property fundamentals. The footloose nature of tenants has largely broken down the invisible boundaries between submarkets. The advent of Crossrail is set to accentuate the ‘mobility’ of ‘new’ industries as well as more established service sector occupiers.