The Impact of New and Emerging Technology on Economic Development in the UK

Technological development is expected to play an important role in re-assessing the supply and demand of commercial property. The application of artificial intelligence, robotics, development of smart cities and use of data centres are all expected to become increasingly important in the economy and will have ramifications for both the quantifiable demand for commercial property and type which is required.

Insight Author

Joshua Harding-Jones

Senior Consultant

Sectors and employment

The demand for commercial property is expected to be driven by the changing labour market and evolving demand for skills. The Department for Business, Energy and Industrial Strategy recently published two separate reports, on the potential impact of AI on UK employment the demand of skills and the economic impact of robotics and autonomous systems. While the two reports give some different forecasts of changing employment figures in the next 5, 10 and 20 years, there remains a common theme of job gains over time in professional and technical occupations, healthcare, information and communication, and public sector activities. While the impact of these developments on the commercial property market needs to be contextualised by way of wider economic trends, they provide an indication of where demand is likely to be in the future. A growing professional and scientific sector, or information and communication sector, will increase the demand for primarily office-based employment premises. Conversely, a declining manufacturing sector will lead to a fall in the need for industrial sites and premises.

Technology and the use of workplace space

The use of AI is also predicted impact commercial property markets. In the case of office space, the use of AI systems (e.g. ‘Internet of Things’) offers a workplace management solution that combines data from sensors and equipment with powerful analytics to optimise several functions with facility management, including space management and energy management. Such systems  can be used to identify under-utilised space that can either be released to realise cost savings or put to more productive use. Heightened efficiency will lead to less floorspace requirements for businesses that implement these technologies. The uptake of AI in management will be determined by need, technical feasibility, the cost of developing and deploying solutions, labour market dynamics, economic benefits, and regulatory and social acceptance.

In the case of robotics, JLL expect to see warehouses decreasing in size, leading to lower land requirements. High levels of automation are set to reduce the size of machinery and equipment compared with manual counterparts, which will enable occupiers to utilise their space more intensely’. This reduction in land requirements will be furthered by a reduction in car parking, which is often a major use of space for warehousing and will be in lower demand as fewer workers are based on-site. An implication of the decreasing size profile of warehouses is that such facilities can be located in more urban areas as they become denser, and take up less space.

Investments in ‘smart cities’ are expected to have a similar effect.  Smart city projects are typically tailored to the requirements of a specific place, and can vary from the use of sensors on lampposts to optimise street lighting, to operating systems for city-wide management of public services and assets. The use of smart city technology will allow for commuting and travel to be managed more efficiently, thus reducing land requirements.

While many of these technologies are land-saving, they all rely on vast amounts of data which ultimately need to be stored. Data centres are becoming an increasingly important answer to this problem, and an increasingly important part of the commercial property market. According to TechUK, data centres are the ‘physical manifestation of the digital economy’. The UK is expected to see an explosive rise in the demand for server storage capacity. The UK already holds the second highest number of data centres in the world and this number is expected to grow. However, these are expected to be in or near major urban areas, where they are most needed to cater for high internet traffic. Proximity to users also means shorter processing times.