Hedge funds moving out. Tech firms moving in

Adam Landau, founder of property firm Devono, reads his office space data like tea leaves to reveal the hot industries of today and the promising trends of tomorrow.

by Adam Landau
Last Updated: 11 Dec 2012

Before the recession set in, financial institutions and hedge funds formed one of the most active and growing sectors to occupy London’s world-renowned commercial property. As we all know, these industries are currently in decline leaving room for a new breed of occupiers which are growing in staff numbers and profitability at exponential rates. Think Google, Facebook, LinkedIn, Microsoft, In Mobi, and Calypso in addition to smaller and growing companies such as Mimecast, Yazino and Zynga.
 
Not only are these industries occupying top quality, grade A office space, they are seeking to change the layout and space requirements of London’s offices to suit their ever increasing expansion requirements. Important factors include: large floor plates due to their need to work in open plan, collaborative environments; and their high level of available power consumption. Businesses in the technology, new media and telecommunication (TMT) industries require mega-volts of electricity to drive their products and keep in touch with their clients.

We are also seeing these TMT firms desperately trying to break away from traditional office locations such as the West End, midtown and City of London where most business sectors normally cluster. These types of companies have looked to move into perimeter central London locations which are considered secondary office locations at present but are also fast becoming the centre of technology in London and Europe. Areas such as Silicon Roundabout, Clerkenwell, Farringdon, Hoxton, Kings Cross and the South Bank are gaining credibility. Research conducted by Wired shows that there were only 15 technology firms located in near Silicon Roundabout in 2007 and now there are more than 100.
 
The current problem is that there is a lack of commercial property opportunities in these areas. This will in turn drive landlords to start developing in these areas to satisfy demand but most importantly with the aim of providing high specification office space. There are at least 12 sites in the ‘tech corridor’ that are either currently under refurbishment or are set to be completed by 2014, totalling over a million square feet in office space.

Some well-known companies have already started moving into these unique areas, such as Groupon, which has taken office space on Swan Lane EC4 and Google, which has just acquired a tech hub on Bonhill Street, EC2 which sits very close to Silicon roundabout. And the tech giant is also in talks to take 700,000 sq ft of office space at a new King's Cross business district development. It is also rumoured that Apple is planning to move to and possibly even build a new office/tech hub to keep it ahead of their competition and give it first dibs on UK talent.

According to industry figures, these TMT companies are now the most active occupiers in London. Colliers recently reported that the TMT sector, traditionally seen as a West End tenant has been growing in importance in the City – now accounting for 24% of take-up vs. 2010: 12% and 2009: 10%. This compares to traditional occupiers: banking and financial – 22% and business services – 22%. Unsurprisingly, take-up by banks fell drastically in 2011 to just c.200,000 sq ft vs. 780,000 sq ft in 2010 and over 1m sq ft in 2009.   

And the next high-growth industry to fill offices across London? My prediction is that it is likely that a return of the oil, gas and mining sectors will shake up the property market once again in the next five years.

Adam Landau is the director of DeVono Property

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