COMMENT Artificial intelligence is having an impact on the way we work at an ever-increasing pace, but far from something to be feared, the inevitable acceleration in its use can be positive for the office sector.
The history of new technology suggests that AI is unlikely to result in large-scale job losses but will instead create a shift in the skills required of workers. Historically, the UK has embraced technological advances, many of which have completely overhauled industries.
However, the overall rate of employment has trended upwards over the past 50 years. Some roles will have been lost as new technologies pick up pace, but others have been created in their place.
Our research estimates that R&D spending by UK businesses on computer programming, information service activities and software development could increase to £10.5bn by 2030 and £27.7bn by 2040. Yet, in an upside scenario or if growth accelerates, this figure could be a lot higher. Huge capital injections going into the sector will fuel the creation of more AI companies and revolutionise existing businesses across all sectors with improved productivity. In turn, successful AI start-ups will scale up as growth accelerates, grow their employee base and require more office space.
Impact on demand
AI will enable higher-value, higher-paid creative and skilled roles, which will also require offices to encourage teamwork, interaction, collaboration, innovation, and training and development.
This should increase the scope for landlords to command higher office rents as the average salary of office workers increases and the workforce demands first-class, well-located spaces.
The geographical impact of AI on the office market will vary. Through analysing a selection of key variables that are likely to influence employment in office-based industries, we have ranked each region according to the impact that AI could have on office demand. While the top-ranked regions are more likely to be net beneficiaries, those at the lower end are more likely to see a net reduction in office demand.
Our analysis found that the North East and the East Midlands were the most vulnerable to job losses from the rise in AI, with a higher percentage of people working in routine or semi-routine roles. The North East also has a lower proportion of people with higher education qualifications and the East Midlands has a typical level of data skills below the national average.
At the other end of the scale, the South East has the largest share of R&D employment (Oxfordshire, in particular, contains major research hubs), with London having the highest percentage of managers, directors and senior officials and those who have higher education qualifications. With these regions placing highest in the rankings, net employment in office-based roles and the subsequent demand for office accommodation is likely to be greater on average.
City hubs
Even within regions there are likely to be variations, reflecting different occupational mixes across towns and cities. The growth in AI may increase the speed at which businesses and their workforce move to more centralised locations, with these areas typically offering larger talent pools and greater employment opportunities.
In particular, London and other large cities with high levels of knowledge-intensive and high-technology employment will see greater benefit from the rise in AI. These industries will continue to grow in these key office markets as they act as hubs where higher-skilled, senior and creative workers gather to share ideas.
AI will have broader economic benefits, increasing productivity by reallocating workers to higher-value-added tasks, and helping the UK’s global competitiveness and innovation. Ultimately, this will feed through to higher employment levels, particularly in skilled jobs, creating further demand for office space.
Sophie Davidson is a senior research analyst at Carter Jonas
