Most tech businesses have been reconsidering location decisions following the Covid-19 pandemic.
Longer term, with concentration risk, business continuity, cost reduction and the future use of office space all high on the agenda, lessons learned during the crisis will influence choices on how and where to work. Location, quality and functionality of space will all be under review and it is timely to start asking the question now: Which locations and spaces will nurture the tech sector in the wake of Covid-19?
Shaken & stirred
The coronavirus pandemic is profoundly disrupting most business sectors, including the technology sector. Research from GlobalData shows that whilst some businesses types are more insulated than others, all 17 sectors in TMT (technology, media and telecoms) will be affected to some degree by Covid-19 related repercussions in 2020 and recovery rates will vary. On a positive note, the aftermath of the Coronavirus outbreak will likely create opportunities for companies providing technology and data-driven products and services in areas like supply chain logistics, cloud IT and automation, as businesses seek to develop operating processes and systems that are resilient to future shock scenarios.
Profound disruption means change
Experience and learnings from the pandemic will galvanise many companies to jump forward organisational transformations (already underway in lots of cases). They may have learnt, for example, that they can easily accommodate more staff choosing to work from home, reducing the need for as much office presenteeism. Or they may have discovered that it might make sense to spread certain operations or teams geographically. With these learnings, firms will be keen to improve their future sustainability and resilience capabilities in order to withstand possible future aftershocks or new viral epidemics.
The choice of office space and where to locate will be ever more critical in nurturing innovation, collaboration and productivity which, in addition to optimising costs, are also vital ingredients in supporting sustainability and future growth prospects of tech businesses.
Compelling Case for Cities
Despite the evident vulnerability of cities to pandemics, the underlying economic and environmental rationale for locating tech businesses in the larger cities remains compelling. Smaller cities and larger towns, however, may also gain in popularity in the wake of the Covid-19 pandemic as people and businesses re-evaluate how and where they want to work.
CBRE’s UK Tech Cities found successful tech locations are closely correlated to large, generationally diverse populations. Big cities tend to perform well as tech locations. It is no coincidence that three of the five most populated cities outside of London also appeared in CBRE’s top five ranking of UK tech cities. The agglomeration economies that advantage big cities include ready access to large pools of skilled labour and proximity to universities, suppliers and customers. Close proximity can also promote information sharing and innovation. Workers also benefit from access to a wide range of leisure activities, a larger number of their peer group and greater career opportunities.
The UK is well placed to nurture the tech sector in the wake of Covid-19. Contrary to common perception, CBRE’s research has shown there are numerous tech hot spots beyond London, with the critical mass of talent and tech ecosystems necessary to compete successfully in this sector. Not only are vibrant regional cities such as Manchester, Edinburgh and Bristol densely populated and generationally diverse with highly skilled talent pools and established tech clusters, they also offer high levels of amenities, recreational opportunities, great transport links and more modest labour, house and office prices than the capital.
Cities will get better
The image and perception of cities, weakened by the crisis, should improve over time as lessons from particular failings are learned and improvements and safeguards implemented to enhance resilience.
Cities must overcome the sometimes frictional challenges of tackling climate change and improving public health. On the one hand densification in cities helps drive energy efficiency and is more planet friendly than sprawls but on the other hand it can be a definite disadvantage when it comes to fighting off pandemics as seen recently.
The pandemic is likely to galvanise greater creativity to be directed at finding design solutions for buildings and neighbourhoods which enable people to mix and collaborate without being overcrowded. It should focus attention on issues of cleanliness, air quality and wellness. Questions to gain greater gravitas will include: Is there too much noise in the environment? Is the quality of air adequate? Is the quality of lighting adequate? Is it impacting my physical and mental health?
Learnings from the Covid-19 pandemic, if acted on, could lead to higher standards and better space in cities. We can speculate that new legislation and technological innovation will emerge. Amongst other things, we should see greater use of technology to understand how people are interacting within cities and within buildings to ensure spaces are really fit for purpose. There will be plenty of obstacles to overcome but with stronger purpose, cities may emerge as ‘smarter’ and safer locations in the long run and therefore sustainable location choices for businesses.
Increased demand for Live-Work-Play?
As surmised, the majority of tech businesses will continue to choose large urban centres as office locations based on strong underlying economic and environmental drivers and likely improvements to cities in the wake of the crisis.
More speculatively, might we also see increased demand for ‘live-work-play’ suburban campuses, innovation districts within cities and smaller locations? As people make some conscious choices about how they want to integrate their private and working lives and consume space differently these options could seem more favourable.
We know the younger demographic already had a low tolerance to commuting before the crisis. A previous CBRE study found 50% of millennials surveyed would not be willing to spend more than 30 minutes getting to work. Greater awareness of holistic wellness including commute times, pollution, quality of green spaces, crime and healthcare could heighten the appeal of smaller cities, large towns, innovation districts with mixed communities and suburban campuses that can accommodate wellness, walkability, buzz and affordability.
Start planning today
As companies adjust to new social and business realities after the crisis, they will be doubtless be striving to maximise property assets and rationalise their estates to account for new ways of working and lessons learned during the crisis. The main driver will continue to be a focus on reducing operating costs, but companies must be careful this is not at the expense of selective investment to drive value and innovation. How and where space is consumed will be more important than ever.
We would love to talk to your organisation around future proofing your own locations to ensure that they align to your dynamic business requirements, support the evolving needs of an increasingly diverse and distributed workforce and provide you with the best access to your current and future supplies of talent to sustain your competitive advantage.