Making the Grade: The impact of office development on employment & city economies

The office development industry is missing a trick by not focusing their attention on smaller dynamic cities with great economic potential.

Report published on 24 May 2012 by Joe Sarling

The structure of the UK economy has undergone huge change in recent decades, moving from a principally manufacturing based economy to a services based one.  The continued patterns of globalisation mean that the UK is likely to continue to specialise in higher value, office-based employment.  This makes the provision of office space very important for the future economic growth of our cities.

Making the Grade finds that, despite strong demand, some of our most successful cities have not seen large increases in the supply of office space.  Despite having high rental values, signifying high demand, cities such as Reading and Cambridge have seen very low growth in office floorspace.  Cities such as Blackburn and Bolton, on the other hand, have seen large increases in office floorspace despite having much weaker office markets.  In summary, growth in the supply of office space has not responded to demand across our cities.

This paper explores patterns of office development by looking at case studies of two large cities – Bristol and Manchester – and two small cities – Cambridge and York – to gain a better understanding of how the office development market differs in these places.

It finds that there is a bias toward larger cities in the office development industry.  Despite their economic potential, generally the industry views smaller cities as too risky to invest in.  This could limit their growth in the future and in response these smaller cities need to promote themselves as investment prospects to developers.

The sheer scale of larger cities means that they do not face this problem.  However, these larger cities will need to be proactive about how they manage the supply of office space provision in order to minimise the obsolescence of office stock in their economies.


Smaller cities

•A new approach to office development is required to help smaller successful cities overcome the concerns developers have about their smaller size and boost speculative development.

•To maximise the choice for developers and businesses, cities should work closely with their neighbouring authorities on spatial planning issues.

•Cities should proactively work with their existing businesses to pre-empt growth where there is evidence that demand for office space is likely to rise.

•Smaller cities also need to raise their profile with national property agents.

Larger cities

•Large cities should maximise their scale advantage to maintain a stable supply of high quality office space.

•They should proactively manage their built environment in order to maintain an attractive business environment for all businesses.

•Large cities also need work with developers to effectively manage their office stock to avoid a structural build up of obsolete Grade B space.

All cities

•All cities should focus on attracting businesses by improving skills, infrastructure and the general business environment.

•All cities need to understand the office stock within their region in order to create a strong offer to businesses.

Developers, investors and agents

•Developers, investors and agents should look to smaller cities for opportunities as these cities are in a strong position to grow office and knowledge-based jobs.

•They should also work with all cities to help them better understand their office stock, business requirements and pre-empt structural obsolescence.

•Agents should collaborate in order to standardise rental value data definitions (for example geographical area and grading) beyond the core cities.

The Centre for Cities is grateful for the support of BCO for this independent report.  Except where otherwise indicated, all views expressed are those of the Centre for Cities and do not necessarily reflect those of BCO.

The British Council for Offices’ (BCO) mission is to research, develop and communicate best practice in all aspects of the office sector. It delivers this by providing a forum for the discussion and debate of relevant issues.