In the next 12 months approximately 2.5 million sq ft of brand new office floorspace will be completed in the UK’s regional cities. Not a lot, given the size of the market, but better than the barely 1.5 million sq ft completed in 2018 (according to Savills). David Thame reports.
This floorspace represents a down payment on the long-term future of the UK workplace – or does it?
Future proofing buildings is notoriously difficult – and in 2019 it is almost impossible. Technology, tenant expectations, construction costs and the cloudy jargon of wellbeing all change so fast that being out of date is almost an occupational hazard. But there is one thing the office pipeline can be sure it has to adapt for, and that is improved connectivity.
5G (standing for fifth generation mobile technology) will mean a quantum change in office connectivity. Faster, with less risk of signal and data drop-outs, it is, to normal mobile technology, what dial-up is to broadband. It will carry vastly more data and do it more reliably – and the upshot will be another radical shift in the way most workplaces work.
The hitch is (as WiredScore’s William Newton explains on page 34) that 5G is still wrapped in unknowns. The first UK services might appear in a limited way in late 2019, but the smarter money is on a debut in 2020-2022. Given the large infrastructure investment required, the latter end of this period seems more likely than the earlier end. At least for most cities outside the London-Thames Valley-Birmingham-Manchester quadrant.
And this, of course, is a problem for landlords and developers. Three or four years feels like a lifetime away. What should they do?
The two questions are: do landlords, developers and investors understand what they have to do? And if they do it, will it make a big difference to rent or occupancy levels?
Harry Badham is Head of UK Development at AXA Real Estate, part of the global AXA empire with £77 billion of assets under management.
If you want to know what the people who feed the office pipeline are thinking, Harry is your man.
‘I think we should think back to the way sustainable and green buildings developed,’ he explains. ‘At first it felt that a BREEAM rating added no value, but today it is effectively mandatory, and we’ll see the same story of 5G connectivity. By then, we’ll have a clear idea of what works and what is just background noise.
“There will come a point when developers will just have to make sure the connectivity is there”
This means making sure there are adequate fibre connections into buildings to provide internal 5G wireless coverage, and adequate distribution of the signal on each floor.
‘The immediate result will be more cloud computing, less desk phones, less heat-producing technology in the office, therefore less air conditioning and less big desks for all the big technology to sit on. This adds up to a leaner, cleaner office,’ Harry says.
Harry also expects 5G to change the way office properties are managed through smart office facilities management.
‘I think 5G is going to mean better-managed offices, but also things like the shape of floorplans may change. Today it depends on cabling, but in the future it might be determined by more human factors and less by the need for fixed wire phone and cable outlets to every workstation. The result will be much denser offices because workstations won’t have to be 1.5 metre desks. We can create different environments,’ he says.
Inevitably more flexibility means less floorspace is needed. Office landlords and investors find that a rather chilling thought, but they will have to grin and bear it.
Installing the right kind of fibre connections and infrastructure to make 5G work costs developers about £1 per sq ft, so a real but modest cost. The software adds another 10-15p per sq ft per year, which will probably go on the service charge.
Telecoms specialists, like GVA Director Michael Whear, say the office market needs to get ready for 5G to open the door to the Internet of Things (IoT),
‘We believe 5G will absolutely be a game changer, not only for smart homes and workspaces but also smart entertainment, farming and healthcare, as well as the much discussed driverless cars,’ he says.
‘The Internet of Things will also be greatly impacted by 5G as the speed of connection between devices and the internet increases as well as a growth in the number of connected devices.’
If the technology delivers, then there is scope for the seamless integration of AI into the workplace and that will benefit workplace practices. Increased network speeds and capacity will also increase efficiency, which could have a positive effect on the work/life balance of employees.
‘The advice we would give to landlords would be to act now as tenants are becoming ever more reliant on technology,’ says Michael. ‘Many tenants looking for office space would expect good bandwidth and low latency as standard.’
GVA says landlords may want to look at deploying an in-building DAS (distributed antenna system), which would provide increased mobile coverage in buildings with poor signal or connectivity. In previous years, network operators may have funded these systems, however, landlords are now starting to recognise the added value to their tenants of boosting mobile coverage within their buildings and are starting to fund these systems themselves.
Down on the ground, the regional agents who will have to let this super-connected floorspace are not (yet) enthused. They warn it could be higher costs for occupiers, perhaps limiting their total budget for other workplace-related investments.
Charles Warrack, Partner at Midlands surveyors Johnson Fellows, says: ‘5G could transform the way we work, particularly if it is combined with coworking. It could be a powerful force for change. But if landlords invest in fibre and internal networks, they will pass the cost back to the tenants through service charges.’
In Leeds, Knight Frank Partner, Eamon Fox, sensibly points out that high cable data speeds mean 5G may not have a revolutionary impact.
‘I don’t think every landlord or tenant is yet wise to what 5G means, but the fact is you can get 10GB broadband in central Leeds, if you are prepared to pay for it, so I’m not sure 5G helps that much,’ he says.
‘Maybe it is what comes after 5G that the landlords have to invest in. Perhaps they have to leap over this technology to the technology that follows?’
And the 5G roll out begins – that is a slightly alarming thought. But it is a sobering warning that technology can have disruptive and unpredictable effects on the office property pipeline. Happy New Year