January 26, 2013
The UK’s thriving technology and media sectors are driving demand for office space in London, creating hotspots of businesses and talent according to a new report published yesterday by property services provider Colliers International. However a shortage of supply means that not only are tech and media firms driving up rents and supplanting traditional businesses, many are adopting more ‘institutional-style’ office spaces then using design and refurbishment to put their own stamp on them.
A report from Boston Consulting Group suggests that the proportion of Britain’s GDP assigned to tech and media is set to grow from its current level of 8 per cent to over 12 per cent by 2016. As traditional sectors such as finance have continued to lose comparative influence in London, the government has been promoting specific areas within the city as hubs of technology and media. It has backed the development of ‘Tech City’ as part of the Olympics legacy programme in and around Shoreditch in the East of London, attracting major corporate players such as Google, Intel and Facebook to join smaller businesses.
While Google is looking to relocate to new offices in nearby Kings Cross as we reported last week, Microsoft is opening a development centre this year to while KPMG is setting up a Shoreditch office to work with small and developing firms in the area. fast-growing companies.
The result is that tech and media companies have dominated the market for office space in both the new hubs and traditional business zones such as Covent Garden and the West End. Total technology and media take-up of space in East London during 2012 was 850,000 sq ft while in the West End it reached in excess of 1 million sq ft. The sector now occupies over 3.4 million sq ft of offices in central London.
One of the effects of this structural change in the market is that tech occupiers are now having to consider more traditional, institutional office buildings types than they would consider ideal, with a view to fitting them out to meet their own expectations and to convey the right image to customers and employees.
Other structural changes saw an increase in demand for smaller spaces of under 5,000 sq. ft. which rose by 8 per cent and comprised 39 per cent of all deals. Demand for offices of between 5-10,000 sq ft dropped from 419,576 sq ft to 272,789 sq ft year on year.