Transcription
Despite concerns over AI displacing jobs, companies driving the technological shift are increasingly taking up office spaces in major cities. Right here in London, lettings to AI firms topped 1 million square feet in 16 months to April. This according to data from Knight Frank.
>> Earlier this year, British Land confirmed the letting of 158,000 square feet of office space to Anthropic in London and 20,000 square feet of workspace to generative AI company Synthesia.
>> Mike Wiseman is the head of campuses at British Land and joins me in the studio now. Very good morning to you, Mike. Why do these companies then need so much office space when presumably so many tech companies have the ability to be more so much more nimble and have remote working and and not necessarily be tied to big expensive office leases?
>> Um yeah, I think the the data we're seeing at the moment is there's some pretty significant growth coming from tech businesses and, you know, it's happening in a way we haven't seen for the best part of a decade. Um and I think for the most part, the businesses that we talk to recognize that they want to bring people together. Um and that the you know, best way to do that is is in your office and uh London's proving a really attractive place to do that business.
>> Is there any kind of um breakdown of where in London is the most popular spot for these tech companies, these AI companies to be based?
>> Yeah, I think it depends what you're doing. So, the the frontier labs, the Anthropic, the Open AIs of this world seem to be locating themselves in sort of the space between, I guess, Paddington and King's Cross, the smart mile, if you like. Um and that's that's proved to be like Europe's capital of tech for for quite a long period of time now. They're drawn to be part of that area. Um yeah, that's where the talent is, that's where the institutions are, that's where their peers are. I think there's another hot spot in and around sort of the northern edge of the city. Um and that's more businesses focused on, you know, crossing over between tech and financial services, tech and insurance. Um so that that's a pretty attractive place as well.
>> In terms of the average duration of leases these companies are signing for, what what are we looking at?
>> Well, I think it depends who you are and and what stage of your journey you're at. So, um if you look at a you know a very early stage business, what they're absolute focus on is is flexibility. You know, we're talking to a just a huge wave of you know new entrants to London uh having conversations with these businesses, not a single one of them is sitting there and saying, "Look, we're going to be 10 people and we're going to be 10 people for you know the next few years." They all have pretty ambitious plans to scale. And so, what they're looking for is a location where they can come in and then they can be guaranteed to grow um for whatever period of time that might be. And so, you know you referenced Anthropic um and the bigger deal that we did a a few months ago with them, but that was the sixth transaction we'd done with them over the course of about 18 months. And so, for them the key driver of coming into London was, you know, take a small amount of space, but know that I've got the next space and the next space and the next space and and that that's why our campus proved really attractive to them.
>> Yeah, I suppose I was thinking kind of the reverse of that where if companies signing for a big amount of office space, but maybe in their own planning down the line, they may not need quite as many people when AI perhaps displaces some of those jobs within the company and they want the flexibility to downscale and downsize as well.
>> Yeah. Look, I there's obviously a lot a lot written um about, you know, sort of future impact on jobs. I think most of what I still read says, you know, it's a net benefit for jobs uh particularly in you know, what I say sort of front office locations, London's very much that. Um and the data shows that, you know, that that is that is what's happening. And you know, it's not just growth that we're seeing from AI and tech businesses, but from more traditional sectors as well. So, we're not we're not really seeing that as a concern at the moment. What people are really focused on is scaling. You know, how can I grow? How have I got that guaranteed ability to grow?
>> Is there anything that's unique or very particular to the requirements these companies have from office space versus other companies that you do do contracts with, or is it pretty much just an office space that they need?
>> Yeah, I think probably with with this group, you know, location super important. So, being in you know, those areas that we've already talked about. Um, flexibility, again, which we've already talked about is the primary driver and that's that flexibility to be able to grow. You know, if you're coming to London and you're planning to scale your business over the next couple of years, the worst position you can be in is that, you know, another team is hired or a company is bought and you can't accommodate them. So, I would say flexibility and location are the two key drivers. Beyond that, it's very similar to what we see from, you know, the best businesses operating in London and that they want to be in, you know, close to public transport, good amenities, good environment for their people to work, um, so they can bring people into the office as much as they can.
>> Does London have enough offices to meet the demand?
>> So, not at the moment. So, you know, at the moment we're operating in a very supply-constrained market. Um, there's been low level of development starts over the last few years and this is happening at a time when, um, you know, that that supply-demand imbalance is is pretty tight.
>> At one point, particularly during the pandemic and and post-pandemic when there was a lot more remote work and we saw a sort of a a trend towards companies wanting the flexibility of the sort of WeWork type style office spaces, um, at at the expense potentially of taking out leases, um, for dedicated office space. Uh, is are you seeing that now reverse or has that stuck to an extent?
>> Yeah, I I think it's probably slight I probably see it slightly differently than that. I think there was definitely a a surge in demand for more flexible space. Um, that remains, but as we've already talked about, the the driver for taking flexible space at the WeWorks of this world, we've got our own brand story that's in a similar space, is that ability to be able to grow, not to be able to take that long-term commitment. And so, you know, if you take some of those higher growth businesses at the moment we're seeing, they would see that as a really important part of an overall portfolio. But, you know, when you're ready to make that long-term commitment, then your own space on a long-term lease still remains the the preferred option for most businesses across sectors.
>> And if you're in conversations with the likes of Anthropic and Synthesia and others, and if they said to you, "Look, we're weighing up a few different cities, and we think this other city has this benefit, and this other city has this incentive for us." What do you say to them that sets London apart from all of the other potential competitors?
>> I think the really good news is we don't need to sell London. And this is the story that I think is um is probably underplayed a little bit at the moment. Uh London's always been attractive as a place to do business. You know, it's a global city, the culture, the place to eat and drink, everything it has to offer. Um it's always had structural advantages for businesses uh around language, time zones, rule of law. But, for for these businesses that we're talking about, what's really drawing them to London is talent. And so, you know, we've got London's most mature I mean, to Europe's most mature tech ecosystem. That's what's drawing people in. That's not easily replicable, certainly not in a short space of time. But, also the convergence of different industries. And, you know, if we think about where the most exciting technological changes will come in the next few years, it's where you have that sort of strong tech talent sitting along deep deep sector expertise.
>> Okay, Mike, thank you very much for joining me this morning on Europe Early Edition. Mike Wiseman, head of Campuses at British Land.