Technology & media office take up 28th January 2013

Technology and media demand is driving absorption of office space in the central London market and helping to harness the potential of new ‘villages’ across the capital, according to research published today by Colliers International.



Total technology and media take-up of City space during 2012 was 850,000 sq ft while in the West End it reached more than 1m sq ft. Together with advertising, internet, telecoms, software and IT business sectors, the technology and media community accounts for over 3.4m sq ft of current central London offices demand. The largest requirement is from Google, which has purchased its new 1m sq ft London headquarters at Argent’s King’s Cross Central. Other major searches include Amazon (300,000 sq ft) and Yahoo (300,000 sq ft) with further large requirements coming from the legal sector.



Colliers International Media Technology Monitor (MTM) suggests technology and media businesses are now considering London locations traditionally favoured by banking and finance companies and locating in areas in the City and Midtown markets, with Tech City becoming known internationally as the major media hub for the UK and, increasingly, Western Europe.



Simon Crotty, director of City offices at Colliers International said: “While demand from banks and financial services has slowed down, companies like Expedia, Skype and Mind Candy have recently moved further towards City core locations. “With take-up of the number of financial services offices in the City significantly down year on year, businesses in the technology and media sector are helping to fill the void, with nearly 1m sq ft taken during 2012.” The growing influence of the technology and media sector is evidenced by the take-up of ‘built space’ across the City market. In 2012, it accounted for 30% of total take-up and 26% in 2011. This compares to just 12% in 2010 and 10% in 2009.



Conversely, banking take-up of office space in the City Core has fallen off dramatically. Just over 200,000 sq ft was transacted in 2011, which compares to 780,000 sq ft in 2010 and over 1m sq ft in 2009. In 2012 the equivalent figure was down to a record low of 90,000 sq ft, equating to just 15% of take-up compared with other business sectors. Shortage of space is forcing technology occupiers to look at more traditional, functional office buildings than previously sought, with a view to reconfiguring the offering and putting their own ‘stamp’ on the units.



Colliers International MTM reveals that in the West End of London, the tech and media sector is focusing more on specific premises rather than location, putting non-traditional media villages and emerging locations such as Euston, Marylebone and King’s Cross, firmly on the map. Craig Satchwell, head of West End offices at Colliers International said: “While the West End is seen as the traditional focus of the technology and media sector, the past few years have seen a shift, not only to the new locations in the northern and eastern parts of the city of London but also within the West End villages themselves. “The greatest concentration of technology and media companies is no longer Noho or Soho but Covent Garden.



Covent Garden now has 2.2m sq ft of office space occupied by media and tech companies. Covent Garden technology occupation has grown by 30% over the past three years, largely helped by the letting of 395,000 sq ft at Legal and General’s Central St Giles scheme, all to media sector occupiers such as Google, NBC and Mindshare.” While the individual number of technology deals in the City and West End markets increased year on year from 2011 to 2012, total take-up, declined slightly. Part of this can be attributed to the increase in the number of deals under 5,000 sq ft which rose by 8% and represented 39% of all deals recorded.



However, the most significant movements were seen in the 5-10,000 sq ft category. Total take-up dropped from 419,576 sq ft to 272,789 sq ft year on year. The total number of deals in the 5-10,000 sq ft category dropped from 70 to 40 (down 43%). Colliers International MTM suggests there may be issues over the evolution of start-ups across the capital, with conversion rates for start-ups in London lower than anticipated. While there appears to be a healthy supply of early stage operations, there may be factors abroad, such as operational costs, shortage of second stage funding and property supply and costs that are inhibiting the growth of these companies.