Digital office demand

A recent report from Jones Lang LaSalle (JLL) argues that the upsurge of businesses from the digital and media sectors looking for office space in the EC1 area of London, means that this area can no longer be considered “fringe” in the context of London rents and office developments.

The Government’s “East London Tech City” initiative to promote Silicon Roundabout’s profile is increasing the global spotlight on the area. ‘Tech City’ encompasses the Shoreditch, Hoxton and Old Street areas of London. Technology firms have been one of the first sectors to take advantage of the improving UK economy and London is viewed as the best location for access to investors, drawing companies in

In terms of subsequent demand for office property this is a trend being tracked at Metropolis, with over 60 current local search requirements listed on the database, including office occupiers such as NeueHouse, Vodafone and Microsoft. In addition, there are a further 50 companies which have expansion plans or arDigitale approaching lease expiries in the area which will lead to property decisions.

Meanwhile, average office rents have risen from £17.20 per square foot to £33.60 in 2013 in the Shoreditch to Hoxton districts, according to Cushman Wakefield, which has led to a pricing out of some of the smaller start-ups in favour of the bigger companies. Start-ups such as GirlMeetsDress.com and Hassle.com say they moved away from the area due to surging rents. So the growth of the area has led to movement in both directions.

Mainstream developers are homing in on Silicon Roundabout, with schemes including Derwent London’s White Collar Factory and Helical Bar’s 207-211 Old Street scheme in the pipeline for 2015 – 2016. There is around 1 million sq ft of speculative space either under construction or with planning permission.

Looking ahead, some of the fastest growing digital companies in London include: Fixnetix, Leadpoint, Mimecast, Quickstart Global, Monitise, Forward Internet, Grove Group, Media Ingenuity, Translate Media and The Foundry. Metropolis is currently talking to many of these firms over their future property requirements.

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Is the TMT sector living up to its billing?

Metropolis recently revealed that London office lettings had reached 9m sq ft in the first 9 months of 2013.

The technology media and telecom (TMT) sectors have received glowing predictions from analysts, as the business areas which will lead London’s new growth spurt. So, in view of the increased demand for office space is the TMT sector living up to its billing?

In short, yes. In the first nine months of 2013 the computer/IT-related technology sector outstripped all others, with over 1.5m sq ft of lettings, backed up by 1.4m sq ft of media deals. In previous years the financial and professional sectors have led the way, but during 2013 they have been relegated to third and fourth places.

Sector

The property press and agents reports have christened the area around Old Street roundabout, London, EC1 as’Tech City’ and the district has been hailed as London’s new growth pole.

However this prediction has not yet come true, with only 670,000 sq ft transacted in that postcode this year, representing only just over 7% of total take-up. There are a number of redevelopments lined up for the area, but it looks likely that it will be some time before it takes a larger share of London’s office take-up.