Three things stand out when comparing the 2016 and 2018 European Commission data for the amount of money invested by the world’s biggest companies into research and development (R&D).

The first is the change at the top. Three years ago, the top six companies by volume of investment were Volkswagen, Samsung Electronics, Intel, Alphabet, Microsoft and Novartis; so three US and one South Korean software/tech company, a German car manufacturer and a Swiss pharmaceutical company.

Two years later, Samsung tops the list, followed by Alphabet, Volkswagen, Microsoft, Huawei, Intel and Apple; so no pharmaceutical company and a Chinese tech company climbing up the ranks to make it five out of six for the tech industry.

The second trend is the allocation of R&D funding by sector and geography. Looking at a wider sample of the 2,500 biggest companies, US companies lead the way with €274 billion allocated, followed by those in the EU (€200 billion), Japan (€99 billion) and China (€71.2 billion), with the rest of the world investing €91 billion. Worldwide, those working in the ‘pharmaceutical’, ‘technology’ and ‘automobiles and parts’ sectors continue to invest the most in R&D (€138 billion, €117.19 billion and  €116.9 billion, respectively).

The third and perhaps biggest trend is that, with the exception of Volkswagen, the amount of money that the leading companies have allocated to R&D has increased significantly. Samsung’s investments rose 7.2 per cent from €12.5 billion in 2015/2016 to €13.4 billion in 2017/2018.

Meanwhile, Google’s parent company Alphabet’s R&D division received €13.4 billion in 2017/2018, an increase of 21.6 per cent on the €11.05 billion two years earlier and Microsoft spent €12.27 billion on R&D in 2017/2018, an increase of 11.4 per cent on 2015/2016’s €11.01 billion.

So what does this mean for commercial real estate? Looking at early stage funding can identify the emerging and often fastest growing companies within specific sub-sectors which are likely to be looking to increase their space. However, there remains significant take-up by the established corporates that are ‘household names’, with these companies, driven by the significant R&D spend, demanding the appropriate level of real estate to accommodate their activities.

The locational future of this R&D is evolving and increasingly shifting to where innovative thinking meets talent. We have seen a push towards locations within major cities/clusters across the world to attract and tap in to this next generation of talent.

Both the pharmaceutical and the tech sectors have been  significant drivers of conventional office take-up globally for a long time. Over the past two years alone we have seen Google buying the entire of Boland’s Quay site on Dublin’s Barrow Street for around €300 million so it has space to 'continue to grow' its EMEA headquarters in the future and Sony Music relocating its Germany HQ offices from Munich to Berlin Schöneberg taking out 90,000 sq ft of space, with Savills advising on both. 

Novartis has also moved its UK headquarters to London’s White City; taking 54,000 sq ft of space with the option to take more if needed. With office vacancy rates at record lows across many European countries, the trend of these companies aiming to secure space earlier and earlier with the potential for further growth is expected to continue for some time.

Further information

Read more: Why Oxford-Cambridge Arc well placed for global tech and innovation