City tech sector to expand by a quarter this year

Knight Frank Research expects the technology media and telecoms (TMT) firms that are transforming London’s the City district to acquire 1.6 m sq ft of office space in 2013, a 23% increase on last year. In 2003, TMT office take-up in the City was 454,000 sq ft.

2013 will mark the third consecutive year that TMT firms have been the largest source of office demand in the City. Moreover, activity is spreading from fringe locations, like Shoreditch and Farringdon, into the City Core and Holborn. These are districts that historically have been linked to the traditional City industries of finance and law.

The first half of this year saw 869,000 sq ft of office space acquired by TMT firms, compared to 513,000 sq ft taken by financial firms. Major deals in Q2 by technology and media firms include:
• Amazon at Sixty London, Holborn Viaduct (212,000 sq ft).
• Publicis at 40 Chancery Lane (96,000 sq ft) and Turnmills (58,000 sq ft).
• FTI Consulting at 200 Aldersgate Street (91,000 sq ft).
• (13,500 sq ft) at the Heron Tower.

Also, the largest financial firm deal was from a company that straddles the border between finance and technology, namely Worldpay. This is an internet payments company which acquired 92,000 sq ft at The Walbrook, near the Bank of England.

For financial firms we expect full year take-up to be 1.0 m sq ft, which will mark a significant increase on the 627,000 sq ft taken in 2012.

The second half of 2013 will see TMT activity driven more by media than technology and telecoms, with News International signing in July on 430,000 sq ft at The Place, at London Bridge. Also, Olgilvy & Mather, the advertising group, are under offer at Sea Containers House, on a deal for 230,000 sq ft of office space.

Commenting on the figures, James Roberts, head of commercial research at Knight Frank, said: “The City’s TMT cluster has seen strong growth in recent in recent years, and I see further expansion ahead. In the US, the average person now spends more time accessing digital media than watching television, and this new world of tablet computers and smart phones is becoming the norm in the UK. I see the roll out of 4G mobile as generating further demand for London office space from the TMT sector in the next two years. We are forecasting TMT firms to take a further 1.8 m sq ft of offices in the City in 2014.”

“Whereas a few years ago, TMT growth in the City was largely a fringe phenomenon, it is now broader-based. Sixty London, 200 Aldersgate, and Heron Tower are buildings where I would more expect to see legal and financial firms taking space, than tech and media firms. Amazon at Sixty London will count other techs as neighbours, like Skype and, but also veteran City lawyers, like Hogan Lovells and Dentons.”

“This is occurring because the tech and media firms have outgrown converted warehouse offices and are now seeking modern, high specification office buildings. These are largely found in locations that up to now have been legal or finance dominated, but the techs are arriving and transforming the occupier market.”