Creative Core
The concept of the “Divine Spark” refers to a centuries old belief that humans are born with an internal spark, which can either be neglected or “kindled” to generate harmony and peace within us.

Creative industries including technology, fashion, architecture, and advertising are looking to their commercial real estate to generate that spark, using it to get the most out of their employees and attract the best and brightest talent from the competition and those entering the workforce. Seaforth Land calls this Creative Core real estate.

The genesis of this creative real estate goes back to the 60’s and 70’s in New York, San Francisco, and London and it is challenging the traditional definition of core office buildings. Like many other gateway cities, these three cities have led the urban renaissance and are now home to the world’s highest concentration of technology clusters around their CBDs - close enough to benefit from finance and other services - but removed and architecturally unique enough to still appeal to the industry’s counter-culture roots. Their influence on the economy and the urban path of growth is indisputable. From humble beginnings in refurbished factories and other adaptive reuse buildings, creative core real estate is enjoying rapidly reversionary rents and covenants as the industry’s economic relevance increases.

Typical creative office buildings are around 20,000 sf which suits tenant demand, available stock, and the changing needs of the market:

The majority of leasing demand occurs below 20,000sf…:  According to research by Deloitte, smaller (sub 20,000 sq ft) office deals have always dominated transaction volumes and have consistently contributed approximately 90% of total space leased.

…which suits the available stock…: In a 2013 report by the City of London they report there were only 31 buildings in excess of 100,000sf (totaling 7.5mn sf) within the City Fringe. This represents 58% of City Fringe stock but 7% of the buildings. Buildings below 20,000sf make up 75% of the buildings in the “Southern Fringe” compared to 53% of City buildings.

…and reflects a shift in needs: With the near elimination of desktop computers, the advent of cloud computing and improved productivity of handheld devices many businesses are opting for reduced office space requirements, hot-desking, co-working and flexible hours/ remote working. The growing role of serviced offices for smaller businesses supports this shift, but also argues for investing in buildings that best suit these new space requirements.

In our full report (email us at to request a copy) we look in detail at some of the factors behind disruption caused by the changing needs of the creative industries and what it means for London’s creative real estate market and why Seaforth Land believes this is a compelling investment strategy.

1. Strong Precedent in Other Global Gateway Cities: Experience gained in markets like New York’s SoHo & TriBeCa and San Francisco’s South of Market (“SoMa”) have led to the evolution of creative real estate to an institutional grade asset class.

2. Finite Supply of Stock with Latent Potential for Value-Add: Originally creative offices were older, adaptive re-use buildings. When available, the structure and fabric of these buildings offers compelling value-add potential for developers and investors with vision but need to be bought at the right price. The potential also exists for building refurbishment and purpose-built creative offices sensitive to the evolving needs of this sector.

3. Persistent Demand and a Strong Reversionary Story: What started as the domain of tech startups is now a destination of Fortune 500 companies as they compete to attract the best talent who increasingly looks to their office space as an extension of their identity. The positive cycle effect of clustering improves demand, the reversionary rent and the reversionary covenants as the limited supply of suitable stock experiences increasing demand.

The idea that commercial real estate can help individuals and even entire organizations to transcend above and beyond that of their peers is not new. It is a developer’s obligation to aspire to build communities while bringing together people, place and prosperity. And while there will always be a need for the agglomerative benefits of new, large scale commercial developments in city centres, many creative industries are opting for City Fringe locations and the unique architecture and organic communities that these areas offer.

Having a global view while thinking locally is important when considering investments in gateway cities like London. But it is Seaforth Land’s on-the-ground specialization in London’s City Fringe that leads to the insights around the risks and mitigants associated with this strategy.