I question whether some occupiers fully appreciate the benefits to their business of high-quality office space in the right location.
Human resources professionals should be playing a bigger part in decisions surrounding the leasing of buildings, as shown by research by Deloitte’s Josh Bersin.
One of his fields of expertise is the “total cost” of losing an employee, and this should give us confidence in the demand and supply of new space in central London.
According to Bersin, the total cost of losing an employee can range from tens of thousands of pounds to 1.5 times or two times an annual salary. This includes the costs of hiring and training a new person, lost productivity, poor customer service and the unsettling impact on other staff.
Initially most employees are a cost, but over time they become increasingly valuable – so why should any company not want to provide the best possible workplaces, to both encourage maximum productivity and discourage people from leaving?
An office building is a technical piece of kit that will begin to wear out over 15-20 years, particularly as technology advances. One tenant who occupied our 200 Aldersgate, EC1, scheme moved from offices that were mice infested and leaky.
The point was also made at Knight Frank’s recent central London breakfast. The firm said: “Demand will focus heavily on amenity-rich product…the role an office can play in attracting and retaining the best people has never received greater focus.”
It added: “The workplace and its surrounds, through the provision of retail, leisure and, increasingly healthcare and educational facilities, can drive improvements in staff attraction and retention, and this will more than counter an uptick in property overheads arising from better accommodation.”
While co-working is on the rise, it will only account for a small proportion of the market.
There will always be a case for multi-let buildings let with longer leases in London, but what will also continue to be a major deciding factor during the war for talent is location.
As much of Mayfair and
St James’s, W1, has returned to residential use, many occupiers have migrated to the east. The geography of London is changing, reflecting where people can afford to live and work. With house prices to the east much lower than to the west, the City and surrounding area has become the centre of the capital’s office market.
The UK economy was moving along satisfactorily 12 months ago and then post-Brexit “Project Fear” took hold. The appointment of David Cameron’s successor was quick and brutal and Project Fear has dissipated. Last July the average predicted GDP growth in the UK for 2017 was 0.5%. In January it was 2.2%.
So despite uncertainty over Brexit I do not see unemployment rising over the next three years. Companies are going to need to keep growing and moving – and will not want to risk wasting millions on losing and then re-hiring talented staff sick of seeing their windows leaking or mice under their desks.
