A flurry of hand-shakes, a snatched pastry and a quick espresso as I recently welcomed clients to CBRE’S biannual London Market Insight breakfast. London has changed financially, culturally and politically but when it comes to London real estate, necessity has been, is, and will be the mother of invention.
Why is this? Well aside from London’s strong fundamentals, which I touched upon last time, it’s all about its clusters; a geographic concentration of core interconnected businesses. London’s ability to create and sustain specialist clusters is why despite Brexit, these remarkable sectors can re-invent or in some cases invent themselves.
Financial services – Despite numerous challenges over the last decade or more, London has remained a leading global financial hub. Cast your mind back to the creation of the euro and the threats posed by Frankfurt – nothing emerged from that and London went from strength to strength. In a property market context, banking and finance account for only 18% of office demand in the past 12 months. Despite London’s powerful specialism in financial services – it is no longer right to describe London as a city of bankers. The London economy is becoming more diversified.
Notwithstanding Brexit, London has faced increasing pressures from automation and off-shoring and the emergence of new financial centres for some time. It has resisted these and remains along with New York one of the leading global financial centres.
Tech sector – Ever since the last recession London has emerged as Europe’s tech hub, recent deals from some of the world’s tech giants serve to underline this point. The tech sector has become a key growth sector, with employment growing by 26% between 2011 and 2016. It has accounted for an average of 25% of Central London take-up since 2011. London has been ranked as the top European city for tech start-ups. Employment wise, around 44,000 people work in London’s FinTech sector – making it larger than either New York City or San Francisco.
Life sciences – this is an emerging cluster for London. The new Crick Institute, described as a ‘cathedral of science’ may well be the catalyst for driving the sector forward. Euston is already a well-established Life Sciences cluster, home to The Medical Research Council, The Wellcome Trust and University College London Hospital whilst Midtown is home to a cluster of private international life science companies. For life sciences, proximity to transport hubs is a key criterion. London provides the link between Oxford and Cambridge by road and train. The Life Sciences clusters at Euston and along the M40 corridor benefit directly from these connections. This connectivity, coupled with a supportive policy environment and world class research and development are all compelling factors in its success.
London’s success is intrinsic in its make-up; its language, its tax and business environment, its leading business clusters, its deep talent pools and not least its ability to constantly innovate.
As for Brexit? Well it just might serve to expedite London’s targeting of other faster growing markets. Long-term it will be about broadening the range of services offered and expanding into fast growing markets. As the mother of invention, I for one am excited to see how London will continue to evolve.
By Adam Hetherington, managing director, London, CBRE.