Jun 29, 2017, 5:26 PM
London is firmly established as a global leader in tech and media (T&M). It accommodates an impressive array of established international corporate companies and new, disruptive startups, all fueled by the hotbed of young creative talent who call London home.
T&M companies leased 7.9 million square feet of office space between 2013 and 2015—nearly double the amount leased over the previous three years.
In studying tech growth in London over this three-year period, we found three trends impacting T&M companies.
Scroll for an overview or download the full report for more detail and six predictions for what the future holds for London tech and media.
Top 3 trends in London tech
T&M companies have become far less attached to their traditional locations. They’re loosening historical ties to certain markets and branching out into parts of London where they have never had a presence before: particularly, the East side.
The data shows that over the last three years 47% of T&M companies who moved originated in the West End but that only 36% of new leases were signed there. By comparison 39% of T&M companies originated in the City and Eastern market but 58% of new leases were signed there.
This eastward migration is led by talent needs and costs.
Aldgate, Clerkenwell and Shoreditch in particular have seen rapid clustering of T&M companies over the last three years. Each is highly attractive to creative talent and costs are considerably lower. For example, Soho on the West side sits at £87.50 per square foot compared to £65.00 per square foot in Shoreditch.
T&M companies are leasing more space than ever before, but not necessarily in larger blocks.
Growth has been rapid with 15% of all UK tech companies set up during 2013 and 2014 alone, driven by startups and small business expansion. The rise of small tech businesses has led to more real estate activity for smaller blocks of space. There was 45% more tech-related property deals in 2015 compared to 2013 and an office footprint that was, on average, 44% smaller.
That said, significant growth is also occurring at the opposite end of the spectrum. The biggest tech companies have been hungry for large chunks of office space, while media companies are also taking on smaller offices.
While tech companies may be demanding less space on an average deal basis, they are demanding more from that space. The battle for talent means tech offices are becoming increasingly sophisticated, innovative and expensive. Given their strong growth rates, flexibility is key to preparing for potential expansion.
Occupancy costs are increasing for London T&M companies. Rents for both tech and media companies increased 21% in two years, rising £9.40 per square foot. Rent growth for tech companies alone averaged 22% compared to 18% for media companies.
Rents across London are expected to rise further over the next three years. The 2017 business rates revaluation has also increased property costs in some markets. With further real estate cost escalation, T&M companies will need to ask themselves how much they are willing to pay for offices in their preferred locations. And if they’re not willing to foot the bill to rent in core markets, they may need to be more pioneering in their location decisions.
For more detail on the London tech market, including six predictions on what to expect through 2018, download the full report