Trends in the London Tech Market

Colliers International has just published its ‘Tech Market Monitor’ for summer 2016. The report looks at the impact of the Tech and Media sectors in London over the last five years and the current trends in the London market.

The main conclusions include:

  • London companies are becoming increasingly ‘footloose’ and are increasingly not tied to traditional London office districts;
  • Tech and Media are now the ‘key drivers’ of the London office market and the sector has seen 5.2m sq ft of moves in the last five years;
  • Tech and Media occupiers, such as Facebook (227,000 sq ft), Google (180,000 sq ft) and Universal Music (173,000 sq ft) were responsible for 26% of London office space taken in 2015;
  • The fastest growing areas include King’s Cross, Southbank and Midtown fringe (Farringdon, Aldgate, Clerkenwell and Shoreditch), with major relocations including Omnicom, Ogilvy & Mather (Southbank), Google (King’s Cross) and Amazon (Shoreditch);
  • Technological innovation is helping to drive the refurbishment and redevelopment of buildings in fringe London office districts. Apple’s decision to take up to 450,000 sq ft at Battersea Power Station is an illustration;
  • The ‘Tech City’ area in London, EC1 has seen a 90% occupation growth since 2009;
  • Tech and media occupiers are prepared to pay high prices to secure the right space and specifications;
  • Future schemes likely to attract occupiers will include: Shoreditch, specifically Helical’s The Tower, EC1 (171,000 sq ft), GPE’s 148 Old Street, EC1 (162,000 sq ft) and Derwent’s Whitechapel Building, E1 (200,000 sq ft).

Metropolis occupier research backs up these trends. Our research uncovered nearly 400 unique new London Tech and Media occupier requirements for subscribers in the last 12 months totalling 6m sq ft. Most of these companies still have ‘live’ requirements.

Metropolis Office Requirements – H1

Over 450 companies vie for London space

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Metropolis research identified over 17m sq ft of UK office demand in the first half of 2015. Just over 9.2m sq ft of this demand was for office space in Greater London, with over 450 companies searching for London space. In the rest of the UK Metropolis uncovered 400 requirements for new space representing 8.1m sq ft of office demand.

Central London office demand reached 8m sq ft, 3.8m sq ft (47.5%) of which was focused on the City of London. EC2 was the most popular postcode for companies planning a move,  with 1.4m sq ft of demand emerging in H1.

A significant proportion of total City of London demand (11%) came from two new law firm requirements, each firm looking for 200,000 sq ft. A new 150,000 sq ft requirement from an insurance group was also worthy of note. Demand from the banking and finance sector reached 1m sq ft, 26% of total City of London demand.

Demand for space in the West End, where rents can reach £125 psf, hit 1.8m sq ft. The largest West End requirement (150,000 sq ft) came from a social media group looking for offices in SW1. Just over 400,000 sq ft of office space (26% of total demand) was required by the banking & finance sector, 79% of which (315,000 sq ft) came from hedge funds and private investment firms.

Mid Town office demand reached 0.9m sq ft, pretty evenly split between WC1 and WC2. About 100,000 sq ft of Mid Town demand came from the technology sector and 90,000 sq ft from the media sector. Demand from law firms was just over 120,000 sq ft and demand from the banking and finance sector totalled 110,000 sq ft.

The largest office requirement in the South Bank (SE1) was a 140,000 sq ft search by an engineering and construction firm. Other requirements of note include a US insurance firm switching a 60,000 sq ft search from Maidenhead to London SE1, and a TV Broadcaster looking for 30,000 sq ft to house its news department.

Two big requirements dominated demand for office space in the Docklands: a German investment bank back office requirement for 350,000 sq ft and an information company requirement for 300,000 sq ft, with a sub-let mooted.

 

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The Top 5 Regional Cities

Manchester – The largest requirement, 400,000 sq ft, was a search by a government department considering space near Piccadilly Station in Manchester. Just over 250,000 sq ft of Manchester office demand came from the legal sector and 300,000 sq ft of demand was attributed to the insurance sector.

Edinburgh – Similar to the picture in Manchester, Edinburgh demand was dominated by a large government requirement for office space (300,000 sq ft), although this requirement could move to Glasgow. In terms of private sector demand, notable requirements included a 100,000 sq ft search by a US Bank and two significant searches from law firms seeking a move in central Edinburgh, one for 50,000 sq ft and the other 30,000 sq ft. There was also significant demand from the accountancy sector, with four firms searching for just over 130,000 sq ft.

Birmingham – A retail bank was linked with the largest office requirement in Birmingham: 170,000 sq ft,  a search now satisfied by space at Miller Developments Arena Central scheme.  Other significant requirements include a potential 100,000 sq ft search from a law firm and a 50,000 sq ft search from a business education group.

Reading – The largest requirement for Reading offices came from a network broadcaster looking for 150,000 sq ft, closely followed by a utility company searching for 140,000 sq ft. Both requirements also consider other Thames valley locations such as Bracknell, Farnborough and Slough.

Bristol – Bristol office demand was dominated by insurance company requirements, with the sector accounting for 56% of total demand (280,000 sq ft). Other notable requirements include an 80,000 sq ft search from a Bristol based law firm planning to combine two of its offices (which may now be a refurbishment and extension of the existing building) and an engineering group searching for 25,000 sq ft.

 

Top Ten Cities (Excluding London) by H1 Office Demand

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Copyright Metropolis Property Research Ltd 2015

 

 

Top 10 London Business Sectors in 2013

Banking & Finance leads the way

Banking and finance leads dominate the London business sector top ten for the fifth year running. The largest office requirements emerging from this sector are focused on the London EC2 postcode area.

Top 10 London Business Sectors

 

 

 

Similar to the UK picture, Technology, Media and Telecoms (TMT)  sectors make up a sizable portion of the top ten in London (33.5%). The largest relocation and refurbishment projects in this sector are focused on London N1 and SE1.

Law and Insurance sector leads saw an increase on 2012 numbers. Unsurprisingly law sector relocation activity centers on London EC4 postcodes, although there was also significant demand for new space in London EC2. Insurance sector office demand centered on London EC3, with close to 700,000 sq ft of space required in this postcode last year.

London office deals reached 12.2m sq ft in 2013, up 37% on 2012’s result. According to our research, over 450 requirements for new space in London were active in the last six months and over 1,300 occupier lease expiries are due in the next two years. We expect to see office demand in London grow further this year, buoyed by improving economic conditions.  There is currently close to 7m sq ft of office space under construction in central London expected to be delivered before the end of 2014.

 

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