A report out next week from global real estate advisors, Colliers International, will reveal that London's burgeoning tech and media sectors are placing an increasing strain on the capital's commercial property market, accounting for one third of all office transactions last year.
The Media & Technology IQ report will also point out that the clustering effect around Silicon Roundabout could be weakened as the tech and media hub of Farringdon, Clerkenwell and Shoreditch (FCS) experienced a drop in new leases over the second half of 2013 because there weren’t enough of the “right” office spaces.
Stuart Melrose, director of London offices at Colliers International, said: “The number of media and technology companies in London has grown by a third since 2009 (29 per cent) but they are now upgrading the quality of the space they want to work in in order to attract talent and satisfy a skilled workforce. They require more efficient space – often with added quirk, which helps make it a more attractive working environment."
Due to lack of appropriate office space and vacancy rates down to a record low of five per cent in the East London area, its growth rate is likely to plateau in 2014, according to Colliers International. At the same time City, Midtown, and Southbank are expected to be the big draw for the tech and media sector.
Melrose added: “Media and tech companies are increasingly footloose and are more likely to be driven by a great building upon which they can project their vision onto, rather than sticking to a distinct location close to their peers as we see in other business sectors."
In Central London there's currently 215 million square feet of office space, and the tech sector accounts for 25.5 million of this, according to Colliers International. However, the crunch for office space is set to be amplified further as more people take up jobs in London’s tech and media sector, with credit and financial information service provider Experian forecasting a rise from 400,000 to 475,000 by 2020.
The increase in the number of people working in the tech sector means that London needs to provide an extra 4.5 million square feet of new office space in the next six years, according to Colliers International.
Much of the demand for office space in London is coming from global tech firms like Google and Facebook who are looking to increase the size of their footprint in the UK capital. Google has plans to open an 85,000 square foot, £650 million European HQ in the King's Cross area before 2016, while Facebook and Twitter have also been looking at opening up new offices in the area.
Guy Grantham, head of offices research at Colliers International, said: “Media and tech companies leased 1.2 million square feet of office space in London last year, three times as much as all other business sectors combined, but it is unlikely that there is sufficient office space available to allow this volume of activity to continue.”
London's Deputy Mayor for Business and Enterprise, Kit Malthouse, said having to find new space for a thriving industry is a good problem for London to have.
“Tech companies are setting up all over the capital in their droves, and it is vital that there is a range of space available for every type of company – from start-ups and SMEs to major firms," he told Techworld.
"There are now a number of shared workspace locations across London with hubs spanning the city, from Chiswick to Greenwich, and Hammersmith to Croydon, which are targeting London’s fast-growing TMT sector. As part of our contribution, we are working hard to transform the press and broadcast centres at Queen Elizabeth Olympic Park into more than a million square feet of space that will be ripe both for new start-ups and more established corporations."