A report published by Radius Data Exchange indicates that occupiers are increasingly favouring the connectivity of a building, rather than its location. Bad luck Kirstie and Phil.
The data shows that on average a commercial building in London with WiredScore Certification commands a rent 4.7% higher than an equivalent building without the same accreditation. But this does not tell the whole story, with certain locations showing more uplift than others.
Accredited buildings in the Core City and West End have relatively low uplifts (0.3% and 1.6% respectively), where as in Midtown and the City Fringe the difference is more notable (9.3% and 9.6%).
It is no coincidence that the areas which are currently attracting companies in the tech, media and telecoms sectors (TMT), where the importance of connectivity is paramount, have seen the most noticeable uplifts. By contrast the areas which show the least impact are those traditionally favoured by the financial and professional services industries.
Delloitte’s most recent Crane Survey notes that the general trend towards pre-lets continues, for both new and refurbished space. The TMT sector dominates this trend, taking 38% of all pre-let space. The report identifies King’s Cross as the submarket with the highest uptake of space on a pre-let basis, with vacancy rates of space currently under construction at 3%. King’s Cross, already home to Google, Facebook, Samsung and Universal Music, is also noted to be highly favoured by businesses in the TMT sectors, who are responsible for taking 96% of its pre-lets.
It is, perhaps, therefore no coincidence that the submarkets which are attracting businesses in the TMT sectors are also showing the lowest vacancy rates and greatest uplift in rents for connected buildings. This is a correlation that has not been lost on landlords and developers, with 70% of respondents to CBRE’s EMEA Occupier Survey, indicating that they would increase their investment in proptech over the next few years.
With occupiers increasingly favouring spaces with better connectivity and landlords keen to secure the best rents, an upwards cycle of supply and demand is seemingly underway and the trend for connected buildings looks set to continue.