The new wave of occupiers that are creating AI technologies - and those that are working with the AI products they create - have a longer list of workspace requirements than the industries that have gone before them.

So how can we at Bywater Properties prepare for this new wave and position our workspace refurbishment and development projects accordingly?

Impact of AI Technology on Workspace Demand

What impact will AI technology have on underlying office demand? If AI is going to make all of our jobs more efficient, and in some cases superfluous as many believe, then will we even need offices in the future?

In some locations, real estate experts predict that real estate demand will actually increase as AI technology develops.

Charles Clinton, CEO & co-founder of real estate investing platform Equity Multiple, believes a multiplier effect may result from investment in firms the likes of OpenAI and Anthropic, based on experience from the US.

“These firms will create a blast radius of demand in real estate markets. Smaller firms will pop up to benefit from the talent that the larger firms draw and to create ancillary value-add services on top of the fundamental AI progress delivered by larger firms.

An influx of highly compensated employees will create demand for coworking space, coffee shops and yoga studios, creating demand for flex office space, retail, mixed-use space as well as multifamily. We saw the same thing happen with Microsoft’s impact on the Greater Seattle area, and Google’s impact on Silicon Valley and the South Bay.”

Similar patterns are being seen in the UK in locations such as Kings Cross in London, around Google's Deep Mind Lab and ahead of the opening of their 650,000 sq ft campus building next year, where affiliates and those that want to position themselves to win contracts in their supply chain are co-locating.

The UK as a Global AI Super-hub

The UK is now a global Artificial Intelligence superpower – being home to the 3rd highest number of AI companies and private capital investment in AI in the world.

Within the UK, London is the focus for AI investment and is a global hub in its own regard with Oxford, Cambridge, Reading and Manchester also attracting increasing attention from the industry.

A number of the world’s biggest AI companies, including Open AI and Anthropic, have chosen London as the base for their first international offices. Microsoft recently announced a new AI hub in London, and one of the leaders in the field, Google DeepMind was also founded over a decade ago in London and is now well established at Kings Cross.

AI companies are attracted to London by access to its deep, experienced labour pool (in turn attracted by London’s cultural influence and access to best in class amenity), its global transport and communication technology links and the stable legal and corporate environment that it offers.

What do AI and Tech Occupiers Want?

Its easy to oversimplify the answer by using the age old real estate mantra of Location, Location, Location - however this is true. AI and tech occupiers want the best location because that's what their employees and their investors want.

In London, locations closest to Tube or Overground stations and nearest to the amenities that their talent pool wants outside of work will win the first review of sites.

In a recent article, Molly Goodliffe, Senior Consultant for JLL Work Dynamics wrote that “London is renowned for its universities, leading to a deep data science talent pool, as a buzzing multi-cultural city, it also attracts people from around the entire world, who want to live and work there.”

Proximity to entertainment, food and beverage options and open and green spaces is also important.

Whilst location is key, there are a number of other factors that we as developers can cater for in the race to secure the biggest AI and tech businesses with the most aggressive growth plans as out tenants.

So what else do AI and tech occupiers want?

They want to Attract and Retain Talent

As well as the location of the workspace, what the talent finds when it gets there is incredibly important in ensuring they (1) make the trip to the office in the first place and (2) that they want to return on a daily basis rather than work from home.

Hubble recently published an overview of notable companies workplace strategies, with the majority (including a number of tech firms) now favouring a full or hybrid back to workspace approach.

How can we play our part to help companies encourage talent back to the workspace?

Wellness Amenity
Provide fitness and wellbeing facilities over and above basic gym facilities, such as saunas or studio spaces for PT, yoga and other classes.

Engagement
Encourage employee engagement with their workplace. For example Square Mile Farms is working closely with occupiers and developers to provide fresh produce and educate about vertical farming and sustainable lifestyles.

Purpose
Deloitte's 2024 survey delves into Gen Z and millennial perceptions on global transformations and workplace evolution. It highlights the importance of work-life balance, purpose at work, values-driven decision-making and more. Employers must focus on creating a purpose-driven workplace.

Companies (and therefore real estate owners and developers) must harness the power of purpose, leading to increased employee engagement, a strong sense of belonging, and therefore, high employee retention.

Those working with companies with a clear sense of purpose will feel more invested in their role in the organisation and can dedicate more time and energy to their work.

They want Supporting Building Technologies

Smart Buildings
Smart building technology that improves employees experience in a building by simplifying access for them and their guests or even simplifies their lifestyle by helping with lunch orders is well covered and established as an offering.

Smart buildings can also help foster an employee's sense of purpose within a building by sharing data on practices like energy use and recycling and help to encourage good behaviour across all users.

Bywater is working with Cureoscity across our developments on our building app technology, leading with Paradise SE11.

Building Specification
The extent to which AI and tech businesses require enhanced base building specification over and above standard office users is also something we are increasingly considering in initial design development stages of our projects.

For example the inclusion of and sizing of risers and M&E to support AI and tech users, the ability to allow for security provisions for server rooms and provision for self contained Edge Computing capabilities are all areas that we are exploring and becoming more comfortable with.

They want Green Buildings

It wouldn't be a Bywater LinkedIn post without a reference to low carbon development and refurbishment of workspaces!

The energy intensive processes employed across the AI industry are likely to mean that its carbon impact will be huge in the future. The generation of just one AI model for example can emit nearly five times the lifetime emissions of an average car.

If we can provide buildings for AI and tech occupiers that help them mitigate their carbon impact then our buildings should be more attractive to them in the future. Whether by promoting energy efficiency and sustainable behaviour in our green leases or building apps, or with the use of sustainable materials and furnishings and low carbon materials such as mass timber we can help occupiers to limit the embodied carbon impact of their workspaces.

At our Paradise SE11 project the use of mass timber in construction helps the 62,500 sq ft office development achieve lifecycle carbon emissions of 491kg CO2 sqm from completion in 2025 which will beat the RIBA 2030 target of 750kg by 35%, 5 years early.

They want Flexibility

Do AI and tech companies want to commit to spaces they might outgrow when they are in aggressive development stages?

How do we underwrite a letting to the hottest start-up when they have burnt through all of their seed capital and are working on the next series of their funding?

What if they wont commit to long leases and have no covenant strength to keep our investors happy?

In short, we need to be more flexible when engaging with these occupiers if we are to attract them, and need to help them with their transition from their start-up space, whether it be in their garage or local serviced office, to our modern workspace developments.

Offering shorter flexible lease terms, fitted space options and simplified lease agreements as well as potential "swing" or growth space within buildings could help this transition. Our challenge is to make this approach stack up financially with our shareholders, lenders and valuers.

If we can curate tenant mix within our buildings to balance the flexibility we need to offer and the income risk this creates with longer lettings to more established occupiers from other sectors then this may help. The more established occupiers benefit in turn from proximity to growth enterprises and the atmosphere and business opportunities that this could create.

In a nutshell then it's all about the best location and having a good mix of tenants in our buildings if they are to be a success.

Turns out not much has changed after all...