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Evening Standard
Evening Standard
Business
Joanna Hodgson

Education institutions expand London footprint, as unconventional office tenants seek more workspace

Sitting in a Shoreditch meeting room this week, Workspace Group chief executive Graham Clemett was upbeat, with plenty of people on laptops, drinking coffee and talking animatedly on the ground floor lounge area of his firm’s “The Frames” building.

Unlike some rival office landlords that have seen post-pandemic demand for space take a battering as corporate giants look to downsize or move to “greener” HQs, the company’s army of start-up and SME tenants have been busy in offices and some are needing more room.

But Clemett says there has also been a significant uplift in London enquiries from a more uncommon occupier type: universities.

The boss says the FTSE 250 firm is seeing growing demand from a broader range of customers, “and education is an exciting emerging sector for us”.

He adds: “We have found that our offer is particularly attractive to regional universities looking to diversify their income by using flexible space to extend their campuses and attract a wider pool of students.”

Workspace is not alone in seeing this type of tenant study real estate options. New figures show education institutions are currently searching for 492,000sq ft of office space in London, the highest ever on record.

Property consultancy Knight Frank’s report also calculates 376,059sq ft was signed for in the last 12 months — that is almost 20% above the annual long-term trend.

The new requirements will be welcomed by a wave of building owners grappling with the long-term impact of how successful the pandemic’s working from home experiment was

Scores of employers are embracing hybrid working and reassessing how many desks they need, and many are taking longer to commit to leases. On top of that vacancy rates could climb as a number of new London office developments complete in 2023, creating more competition in the fight for landing occupiers.

So just why are tertiary education institutions examining real estate in London, and what other “unconventional” tenant types are expanding?

Interest in the capital comes as some would-be occupiers want to co-locate in knowledge clusters alongside other public and private sector companies to foster partnerships.

Emma Cleugh, a partner at Knight Frank, says recent transactions and requirements “are bearing out a strong trend that has been emerging with educational institutions creating or anchoring knowledge quarters with best-in-class commercial buildings”.

These sites are typically separate from main campuses and complement them, and demand is coming from across the UK. She points out that the capital’s university student population grew by 8% in 2022, with the number of non-EU students increasing by 17%, the fourth year of double-digit growth.

York St John University, which last year opened a campus at the Export Building at Republic in East India Dock near Canary Wharf, has recently signed to take a further near-25,000sq ft there. It offers a range of postgraduate programmes in business, computer science and healthcare management.

While most of its courses remain in York, it thinks having a London facility is helpful because it offers business engagement opportunities that support student work placements, research and industry experience.

Other deals include the Fashion Retail Academy moving to a larger home in Moorgate in September 2024, meaning it will have space to give students better facilities and launch new courses.

While those in learning sectors want office buildings with strong sustainability credentials, not all of them need to be in new developments in the heart of the City and West End.

Guy Grantham, director in the research and economics team at property agent Colliers, says: “The flight to quality that we have seen since the pandemic means that oversupply of secondary Grade B quality landlord and tenant space has swelled markedly.”

Grantham thinks some educational occupiers “will play a critical role in absorbing sub-prime office space given the less stringent criteria usually attached to their requirements, both in terms of specification, geography and pricing”.

Meanwhile, Anthony Murphy at commercial property consultancy Making Moves London lists other industries that are growing:“As opposed to pre-pandemic where we saw office occupancy being led by conventional businesses such as banks and tech giants, we have now seen a rise in a new wave of occupiers such as MedTech and BioTech, taking space.”

Property developer Stanhope’s boss David Camp agrees and says in the last few years a number of lettings from life sciences businesses have been signed at its White City Place scheme close to Imperial College London’s White City campus.

Camp continues: “New ways of working have changed the way businesses are using their workspace and whilst this is leading to some businesses seeking to reduce their footprint we continue to see growing demand from life sciences, creative, fashion and media companies in White City.”

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