_What does the future hold for our UK cities?

The future health and wealth of our cities is increasingly dependent on the real estate industry’s ability to understand, anticipate and respond to occupiers’ needs, be they a resident or business.

The major UK cities outside of London are growing, in terms of their businesses and population. Birmingham, Bristol, Cardiff, Edinburgh, Glasgow, Manchester, Newcastle and Sheffield all exceed the respective long-term trend, with business growth in Birmingham and Manchester in particular rising by 41% in just five years. 

With this follows the continued expansion of the UK city core markets. Schemes such as Paradise in Birmingham, Central Square in Cardiff, Wellington Place in Leeds and West Bar Square in Sheffield have the potential to deliver up to 5.5m sq ft of new office space to market. 

Digital disruption 

The likes of Legal & General have been leading cutting edge investment into UK cities, such as in Central Square in Cardiff.

Central to this continued development is our cities’ ability to respond to the challenges and opportunities brought by digital transformation. Already, we have seen this lead to fundamental structural changes to traditional businesses, a rise in M&A activity and new sources of occupier demand coming to the forefront. 

One such example is the life sciences sector, which is increasingly starting to feature in city demand schedules as R&D is undertaken on a computer, as much as in specialist labs. This is evidenced by the Bruntwood SciTech joint venture between Bruntwood and L&G Capital, which, amongst other things, is developing Citylabs in Manchester’s city centre.

Digital transformation has also changed the way real estate is used and managed. Customer experience within offices is a key supply-side driver. The emergence of co-working has shifted the dialogue to encourage greater focus on ‘space as a service’ and the importance of including the right amenities to attract and retain talent.

Space as a service  

The level of service offered by flexible office providers such as Fora is becoming increasingly important

Smart buildings designed to optimise the working environment and active asset management enabled by new technologies are changing the way offices are being delivered and re-positioned. The service layer provided within offices is becoming increasingly important. We are already beginning to see a more hospitality-led approach to asset management, with examples emerging from around the world. 

Employee demands and expectations now have a direct influence on where businesses are choosing to locate. Digital and physical connectivity, affordable housing and variety of local amenities all contribute to the attractiveness of a workplace to the new generation of workers. Overarching these ‘lifestyle’ factors is an awareness and sense of responsibility to the environment. The importance of sustainable buildings has risen. 

Sustainability in the war for talent 

Liz Peace highlights that sustainability excellence is key for recruitment

At Knight Frank’s recent ‘Future of our Cities’ event, Liz Peace spoke about how, “when [young people] go for an interview, one of the first questions they ask is ‘what’s your company’s sustainability policy?’. They want to know how green the building is.” 

With unemployment at a 40-year low, talent attraction begins at the education stage. The UK cities are retaining more graduates than ever before; graduate retention rates for Manchester, Glasgow, Edinburgh, Birmingham, Cardiff and Aberdeen all exceed 40%. 

Schemes such as Newcastle Helix, where Newcastle University, the city council and Legal & General are demonstrative of local authorities and the real estate industry collaborating in an attempt to define a career path and ensure that graduate aspirations are able to be serviced locally.

So what does the future hold for the UK’s cities? Our research shows cities are getting bigger and attracting more businesses and variety of occupiers, which will continue to have huge implications on the real estate industry. We need to be able to understand and respond to the various pressures and disruptors to ensure our future cities continue to thrive.

Lee Elliott is global head of occupier research at Knight Frank. His focus is providing market insight and foresight and leading the commercial research team as well as developing a dedicated occupier research programme for the benefit of occupier clients and business teams.