According to Media & Technology iQ, a new report from global real estate advisors, Colliers International, media and tech companies accounted for one third of all office transactions in London last year. However, the tech and media hub of Farringdon, Clerkenwell and Shoreditch (FCS) experienced a drop in new leases over the second half of 2013, due to a lack of supply of the right office space.
Employment levels are expected to rise by 20 per cent in the media and technology sector (Experian forecasts a rise from 400,000 to 475,000 people working in media and tech industries by 2020), meaning London needs to provide an extra 4.5 million sq ft of new office space to accommodate this growth.
Last year, every central London submarket except the eastern end of the City which witnessed the average amount of office space increase, with King’s Cross average deal sizes growing from 2,064 sq ft to a staggering 89,831 sq ft. New office deals in FCS rose by 500 per cent, the West End by 280 per cent and the South Bank by 641 per cent year on year.
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.
“As such, 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.
This issue is highlighted in Media & Technology iQ, whereby the quality of office design and specification available – e.g. Grade A space in Southbank over Grade B space in FCS- is driving the choices of companies over and above geographical location. The Media and Tech ‘cluster effect’ could slowly lose its grip on the market as office supply fails to keep pace with demand.
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. At the same time City, Midtown, and Southbank are expected to be the big draw for the tech and media sector.
Guy Grantham, Head of Offices Research, Colliers International said: “The London market saw five media and tech companies take an excess of 100,000 sq ft of office space during 2013 compared to just one in 2012. Media and tech companies have leased 1.2 million sq ft 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. Despite this, media and technology will remain the most relevant type of occupier in London for the foreseeable future.”