Key Trends

  • What makes a business district attractive?
    • 1 - Our survey
    • 2 - Access to talent is the top priority

      Of all the potential qualities of international business districts, access to skills is by far the most important driver of attractiveness: 70% of respondents consider it "very important" for their location choice.

      Business district occupiers chiefly recruit staff focused on national markets. This can be seen from the roles and qualifications of their hires. EY’s Global Talents in Global Cities Survey (2015) defined five leading categories of talent: students, researchers, business managers, entrepreneurs and creatives.

      Interviews with business district occupiers identified two priority levels:

      •  The ability to recruit executives to top national roles. This concerns two distinct groups of recruits: those at the beginning of their professional life and experienced business leaders. These two groups of employees are essential to businesses. This poses a real recruitment challenge, particularly because some may live a considerable distance from the business district. That makes easy travel to and from the business district essential. So access to talent is evaluated in terms of the metropolitan labor pool, not that of the business district.
      • Access to researchers, entrepreneurs and creatives is becoming increasingly important because it facilitates development of an innovation-friendly environment. However, availability of this group is secondary.
    • 3 - The quality of the urban environment and the range of its economic influence are crucial to business district attractiveness

       Business district attractiveness is founded upon an attractive urban environment, good transport links, business connections (proximity to markets, clients and partners), and national and global reach. The quality of the urban environment is considered "very important" by 47% of respondents. Being in a good business ecosystem is similarly important for 46%, and being central with global connections is vital for 43%.

      The priority given to the quality of the environment reflects the importance of accessing talent. To attract the skills they need, companies have to offer employees an attractive quality of life. It is not enough for a business district to be easily accessible. For occupiers to persuade highly skilled employees to agree to work there and continue working there, the business district must ensure company staff can "work, live and play" in the business district. Employees want to work in a location that has leisure and entertainment facilities and activities.

      From a corporate perspective, the capacity of business districts to offer an environment that is favorable to innovation is the strongest differentiating factor. Now, and in the years ahead, innovation will be a powerful lever for companies and a key to their performance. We know that an environment conducive to innovation correlates positively with GDP per head, especially because of the link between creative environments and entrepreneurship. Ultimately, the ability to attract young, innovative companies is an opportunity to enhance the productivity of leading services businesses established in international business districts.

      Ensuring the development of a start-up ecosystem is really the means to secure the availability of an innovation ecosystem for large companies within a business district. Big companies say they want access to an innovation ecosystem, though they don’t necessarily need it to be located in the heart of the business district. In reality, big companies take a common approach to accessing talent and innovation: they look for it across the metropolitan area. London’s Tech City district, an innovation district located in and around Shoreditch, is a good example, just a short walk from The City. Benefiting from good access to talent and the proximity of a major financial center, it exemplifies the symbiosis between a business district and an innovation ecosystem, without being in the heart of the business district.

    • 4 - Cost competitiveness is increasingly crucial and complex

       Though fewer respondents — 35% — say cost competitiveness is "very important," occupiers nonetheless analyze it closely, systematically and in fine detail. Companies take a "value for money" approach to the relationship between costs and quality, integrating nonmaterial factors. Cost competitiveness therefore goes far beyond property costs and now embraces all of the hidden costs, including the values of a central location, modern facilities and connections, which shape attractiveness and staff retention.

      All respondents rank the quality of property the least important factor for a business district. Having access to appropriate offices is identified as being "very important" by only 14% of respondents and 24% of occupiers, for whom this is a basic need. But that doesn’t mean companies don’t care about the quality of offices and facilities, or their modernity and flexibility. Rather, it shows that high-quality offices, such as affordable operating costs, are seen as a prerequisite for business district competitiveness. High-quality offices are so essential for companies that they don’t see them as a differentiating factor, except in terms of the services they offer corporate employees, which can enhance productivity, economic efficiency and employee loyalty.

      Property is the second-highest category of expenditure for service companies, so optimizing costs in this area remains an effective lever of business efficiency. In 2015, the average workstation in Île-de-France was allocated 19m². But "offices of tomorrow" are likely to target occupation space of 10m² net per employee. Better building layouts and increased use of technology will enable companies to occupy less space, with a substantial impact on rental costs and charges. Property experts underline the importance of the different types of workspaces available for employees. Properties are evaluated not just in terms of costs per square meter, but in terms of the performance and services offered by different properties, such as the availability of collaborative space, which contributes to a more friendly working environment, better adapted to the working methods and needs of new generations of workers.

      The cost of world-class business districts
      Business DistrictRankingEY-ULIIndex
      Canary Wharf - London172.9
      Paulista Avenue - Sao Paulo262.6
      DIFC - Dubai357.8
      The City - London457.3
      Chaoyang - Beijing554.8
      Financial District - New York647.9
      Sandton - Johannesburg746.4
      La Défense - Paris845.9
      Downtown Core - Singapore944.2
      Bankenviertel - Frankfurt1044.0
      Zuidas - Amsterdam1136.8
      The Loop - Chicago1235.6
      Midtown - New York1331.6
      Pudong-Lujiazui - Shanghai1430.6
      Bandra Kurla Complex - Mumbai1529.4
      Marunouchi - Tokyo1625.3
      Central District - Hong Kong1717.6
  • What will tomorrow’s business district look like?
    • 1 - The attractiveness of business districts and their metropolises is entwined
      “Country and city factors remain critical in shaping the international location strategies of companies”
      “The exceptions: global hubs and cross-town moves”

      However, there are some exceptions to the standard location decision process. Some business districts are so dominant and central to the economy of their city that they shape corporate location decisions, irrespective of national economies. The world’s leading financial centers, including the City of London, the Financial District of New York, the Central District of Hong Kong and the Downtown Core of Singapore are good examples. Thanks to their economic weight and reach, these business districts form a different and relatively closed league, competing mainly with each other. Dominating entire regions in their specialized field, these centers are obligatory locations for their key clients. In this case the location decision process is reversed: companies care more about the regional dominance of the business center than about its surrounding city or country.

      Yet business districts are also competing to attract or retain companies relocating within cities. The intensifying search by companies for flexibility, optimized space and costs, and access to talent pushes many companies to consider relocating within the cities where they operate. These pressures underpin the emergence of peripheral office parks, and drive competition between business districts, forcing them to rethink their strategies, innovate and renew their appeal to help retain existing occupiers and attract new ones.

      “The future: business districts are becoming more deeply integrated into the city”

      Confronted with changing decision-making dynamics, business districts and their cities are responding energetically. Users are demanding a higher quality urban environment, easier access and leisure activities. So cities and business districts are becoming more integrated, and zoning restrictions and other barriers are fading. This widespread trend can be seen in the development of infrastructure and the development of complementary facilities, as well as in the availability of a broader range of services and in the promotional strategies adopted by city and country agencies.

    • 2 - Business districts are becoming ‘places to be’
      “The mono-functional business district is obsolete, and needs to change”
      Focus: Amsterdam Zuidas invests in better access and sustainability

       Amsterdam Zuidas, located between Amsterdam’s Schipol airport and the city center, is the Netherlands’s main financial hub. Over the last ten years, the area has been undergoing a major redevelopment aiming to turn the area from a commercial business district into a mixed-use urban center. The 2009 masterplan for the district prepared by the Zuidas Amsterdam Development office proposed creating a highly sustainable, transport-oriented development. The district’s accessibility is central to its appeal. The area is already well connected by tram and bus, and will become even more accessible with Amsterdam’s new North/South metro line opens in 2018. Sustainability is also central to the vision for Zuidas. Development and design guidelines emphasize sustainability, and the area is home to the world’s most sustainable office building, The Edge.

      “Business districts must be open outside office hours”

      Satisfying the desires of employees has become an indirect way to attract leading firms. Outside office hours, employees are consumers, and companies are therefore increasingly inclined to move to districts where employees like working. Among interviewees, 44% believe business districts need to offer more services for their workforce, especially shopping and dining. Overall, 38% of respondents also believe that leisure and cultural facilities will play a growing role in the business districts of tomorrow.

      Focus: Marina Bay: Singapore’s lively extension to its Downtown Core

      Marina Bay is a 360 hectare master-planned extension to Singapore’s central business district, built on land reclaimed from the sea. Recognizing that Singapore’s traditional CBD had effectively become a single-use area dominated by offices, the Singapore Urban Redevelopment Authority’s (URA) goal for the development was to create a 24/7 live-work-play environment. Open spaces, including a waterfront promenade, and a regular program of events have created a welcoming, lively environment that is a destination for locals and tourists alike. The development benefited from substantial public sector attention to, and investment in infrastructure, open space, transport and urban design. The URA used a number of creative strategies to create this mixed-use environment. Developers were not subject to strict zoning rules but encouraged to develop their own proposals for how to mix uses, and benefited from schemes designed to reduce their financial risks. In return, they were expected to deliver the mix of uses and substantial public amenities that now characterize the district.

      “Residential developments add to business district appeal”

      A third of respondents said business districts need to add more residential property. If this can be achieved, building homes and schools will create a virtuous circle aiding the development of a mixed-use district at the heart of the city, filled with life throughout the week and weekends.

      Within buildings, interior fit-outs are becoming as varied as companies. Walls are being replaced by moveable partitions. Open-plan offices intended to aid collaborative working are giving way to more varied workspaces conceived to encourage creativity. Business districts no longer offer just offices, but rather workplaces which can reflect the management culture of a business.

      Shared spaces are becoming more important, whether they are rest areas, shared meeting rooms or collaborative workspaces integrated with rest areas. These spaces enable employees from different firms to relax, and collaborate. This trend looks set to continue: our interviewees expect collaborative workspaces to triple within five years.

      Once seen as uneconomic, because it could not be rented and does not generate revenue, public space has become the key to increasing a district’s value. This is reflected in increased attention paid to green space, walkways and street furniture.

      Paris La Défense: committed to workplace innovation

      Paris La Défense is already exploring the factors that will shape the offices, and business districts, of the future. On 8 and 9 December 2016, Defacto brought together 2,000 corporate executives, human resources chiefs, real estate advisors, start-up experts and researchers from around the world to discuss office innovation and review developments in the world’s international business districts.
      Some new projects are already emerging from this innovative thinking about property and public spaces. One is OXYGEN, a co-working space which opened at the beginning of 2016. Another is the so called ‘Alternatif’ project to convert the Villon carpark, previously dedicated to the Ile de France and Majunga buildings, into a multi-function seminar and concert venue. A new co-working space, the biggest in Paris La Défense, will be opened by Nextdoor within the Tour Cœur Défense in 2017, offering more than 8,000m² of space.

      “Business districts need to become destinations in their own right”

      First, the business district needs to become a ‘post card’ place, that matches up to employee expectations, and is perceived as attractive.

      Second, the perceived value must be matched by reality, relying not just on clichés, but on the real-life experiences of those who live and work there. The business district needs to deliver on expectations that it is a great place to be by achieving a high quality urban environment with outstanding cultural and retail opportunities.

    • 3 - More flexible use of space is transforming the cost equation
      “Business district occupiers want to optimize their costs, and that is becoming ever more complex”

       Occupiers now take into account all of the ‘hidden’ costs of occupancy, which vary according to the how central the location is, and how modern or unusual, especially when bringing together all of their activities on a single site. The choice of property affects productivity because:

      • travel time impacts time worked;
      • location affects staff loyalty;
      • urban environment affects motivation.

      In leading service firms, the choice of offices is no longer made by the finance department alone, but is often heavily influenced by human resources, and also the innovation and IT departments.

      As a consequence, business districts cannot merely rely upon their location and ease of access to centers of decision making. They must offer more flexible and innovative properties to justify their high prices.

    • 4 - Business districts are opening to start-ups
      “The core market for business districts is unchanged: big companies and high value-added activities”

      Looking ahead, experts do not foresee any radical shift in the business district client base. Big companies and high value-added activities that need large amounts of office space, historically the main occupiers, will continue to dominate. Finance, banking, audit, consultancy and insurance will likely remain the main tenants. High rents will continue to discourage other activities from moving in.

      “Business districts need to attract start-ups too”

      Business districts cannot afford to ignore start-ups, because their presence is becoming an effective way to attract big companies which are constantly seeking new sources of growth and innovation. The presence of start-ups also demonstrates the ability of a business district to innovate and enhances its image.

      Attracting start-ups should be a priority for all business districts: 42% of experts surveyed believe start-ups are critical to the future development of business districts. Yet property professionals and occupiers alike do not yet see much of a trend for start-ups to move in. Experts interviewed for this research believe business districts need to adapt their culture to that of start-up founders and employees. That means offering not just more affordable but appropriate workspaces, with more flexible leases and a more attractive working environment.

      Where possible, business districts should provide less standardized refurbished buildings, which are clearly distinct from Class A offices.

      Focus: In London, the City is seeking to diversify by creating a technology innovation ecosystem

      While often seen as a hub of large companies, the City of London is in fact highly diverse. Over 98 per cent of City tenants are small to medium sized businesses. The local government for the City, the Corporation of London, recently launched a strategy to support this diverse ecosystem of businesses, and attract and retain digital businesses in particular. Their vision is a business district where small start-ups work on creating the products demanded by larger corporate tenants, from fintech to artificial intelligence. One action the city is taking to achieve this is welcoming and encouraging the development of flexible workspaces. London’s co-working office market is already the largest in the world, and continues to grow. Flexible workspace in London as a whole grew from nine per cent of the market in 2015 to 16 per cent in 2016. To complement the demand for flexibility and co-working, the city is also prioritizing placemaking, activating existing open spaces by using them to host events, particularly outside traditional office hours and prioritizing a greater diversity of retail offerings.

    • 5 - Image building and marketing are key for business districts
      “Changing user expectations could herald the end of global financial center dominance”

      ‘The older the business district, and the more specialized in finance, the better it is perceived.’

      Our global survey shows major changes in the qualities users judge attractive in business districts. In future it seems attractiveness will be shaped by their degree of economic and usage diversity.

      Focus: Rivalled by Midtown, Lower Manhattan is a historic business district that is now diversifying

      Lower Manhattan is best known as the home of Wall Street and the historic birth-place of the American financial industry. During the second half of the 20th Century, this district faced tough competition from Midtown at a time when companies were seeking more modereen and flexible offices. During the 1990s, almost 25% of the 9.3 million square meters of offices stood empty..

      To address this problem, New York created a tax incentive designed to encourage the conversion of offices into multiple dwellings. Since 1995 almost 1.5 million square meters of offices have been converted into 14,000 homes and 350 hotel rooms. More recently, the development that replaced the former world trade centre has introduced a large amount of additional retail to the area. The shared service office company WeWork also chose Lower Manhattan for its first co-living development, WeLive.

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