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Forget (for now) edgy areas like Shoreditch and Whitechapel — tech occupiers are favouring the more traditional environment of the City of London.
Tech companies leased almost three times more space in the City core in the first quarter than in the City fringe areas they have traditionally favoured — 115K SF vs. 42K SF, according to Savills.
A lack of available space in the City fringe, the fact that these areas are now almost as expensive as the City core, and the trend toward repositioning City buildings to appeal to tech occupiers are the reasons for the change, Savills said.
As tech occupiers grow they are increasingly likely to take space in the traditional City core, where there is more space available, and the Q1 figures were somewhat skewed by a single deal, Mimecast signing up to 79K SF at 1 Finsbury Ave. for £55/SF on a 10-year lease.
Other large deals in the City included CallSign agreeing to a new lease on 13K SF at 150 Cheapside and Connect Managed Services taking 15K SF at 25 Copthall Ave.
Overall the City and City fringe are doing a booming trade in leasing to tech occupiers, with take-up in 2017 65% higher than the long-term average.
“Where we have historically seen the majority of tech occupiers opt for fringe locations, there has been a notable shift in 2018 driven by a lack of supply in these areas,” Savills Central London Office Agency Director Paul Bennett said.
“Tech firms with large operations require buildings that will support their staff and business, and we are seeing landlords in the City core reposition their buildings to cater for these tenants. Adding to this, as occupancy costs broadly align across the City core and fringe it is allowing occupiers driven by cost to be more footloose across the two sub-markets.”
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