The buzzing ideas marketplace of Shoreditch has become hallowed ground for tech/creative specialists and independent entrepreneurs. But for it to retain its enviable status, the area must address some key issues.
Tech/media sector take-up in the Tech City heartland around Shoreditch and the Silicon Roundabout has risen by 90% over the past five years, according to Colliers International research.
In 2015 alone, the sector accounted for more than a quarter of overall take-up, securing 1.7m sq ft out of 6.8m sq ft of offices.
But with rising rents, patchy internet connections and a lack of affordable supply, Shoreditch is vulnerable.
Anthony Impey, chief executive and founder of digital solutions company Optimity, says poor digital infrastructure is one of the most significant threats to the sustainability of the area’s economy.
Optimity’s research shows that internet availability is a big problem, particularly in east London, where the facilities needed by some tech start-ups are costly and difficult to install.
Impey says: “It is the most important piece of infrastructure, over and above the Tube, roads and other transport. The strength of our digital infrastructure will underpin the competitiveness of tech and London’s status in the global economy.”
Juliette Morgan, head of property at Tech City UK and partner at Cushman & Wakefield’s global technology practice, agrees, saying that the difficulties are “numerous”.
“For the past four years, Tech City UK has been badgering BT to improve. But being able to physically get into buildings to connect them and getting engineers is difficult. It is not a simple problem to solve. The University of Surrey is testing 5G, which will hopefully help,” she says.
Limited internet access can lead to problems before businesses have even moved in. One occupier had to pay rent on a vacant office for four months while waiting for fibre optic cables to be installed, says Impey. Some companies have even moved to areas with better connectivity.
The issue is being addressed. For example, Optimity uses wireless technology that replaces the need for fibre optic cables by installing rooftop antennae on office buildings.
WiredScore has introduced a standardised connectivity ratings system to certify office buildings; several major UK developers, including Land Securities and British Land, have signed up to the scheme.
WiredScore’s William Newton says connectivity in Shoreditch has vastly improved but adds that businesses must be prepared to pay more for top-of-the-range broadband infrastructure.
Another challenge Shoreditch faces is a shortage of space. The 2016 Deloitte Crane Survey showed that the tech sector has the highest demand for new offices and, as a result, 73% of space under construction in the belt along King’s Cross to Aldgate is let.
Tech London Advocates founder Russ Shaw says the area is a victim of its own success.
“We are seeing smaller start-ups being priced out of office space [see box]. Clusters are crucial to digital success, as we see from the strength of San Francisco’s Bay Area,” he says.
Chris Antoniou, co-founder of Clerkenwell-based advisory firm Anton Page, has been working in the Shoreditch market for 25 years. He says that 15 years ago, rents were £10 per sq ft. Now they are as much as £60 per sq ft – Derwent’s White Collar Factory achieved £65 per sq ft in a letting to Capital One.
No one wants to kill the golden goose but neither do they want to hold back evolution, and while a strategy is needed to ensure Shoreditch remains attractive and functional, there is more to London’s tech sector than Silicon Roundabout.
A mature market
The migration of smaller start-ups away from Shoreditch has changed the area. The market has evolved; property funds have moved in, assembling larger sites for larger development, which has attracted corporate occupiers. Is it losing the individualistic edge that made it so attractive in the first place?
Colliers International City fringe expert Michael Raibin says: “Landlords and developers can justify being able to create these wonderful buildings only by securing long-term tenancies. The thing you can’t forecast is the grey space but most of the calls we get are from companies looking to expand. You can’t deny that it will be sustainable.”
Strettons’ Mark Bolton believes Shoreditch will retain its edge, with emerging clusters acting as a secondary market. But it will have a more corporate feel with the arrival of fintech businesses, he says.
Chris Antoniou of Anton Page adds that the age profile of the staff in these businesses and what they do is not particularly out of kilter with those already in Shoreditch. The biggest change is the proliferation of chains such as Pret a Manger and Boots.
Juliette Morgan from Tech City UK and Cushman & Wakefield, believes big and small companies can work alongside each other. “The offices are being built in a really insightful way. Companies come here to be close to the small independent stuff and they have to protect it. I don’t see Shoreditch becoming this shiny thing that people that don’t want to be in anymore.”
What the occupiers think
From an occupier’s perspective, Shoreditch remains the most desirable location. But few can afford to stay.
Amit Shah, of RoomFlick, a company that matches landlords and tenants, says the company wanted to stay, but could not. “We are currently in WeWork in Aldgate, but the majority of startups are driven further east. The Silicon Roundabout is our Silicon Valley and the rents could threaten what it wants to be. But there will be other clusters.”
Henry Bennett, chief executive of tech start-up YourWelcome, works out of Second Home, in Hanbury Street, E1. He says companies want to stay in Shoreditch because of the competition for talent. “Shoreditch is not cheap, but you have to locate yourself somewhere that matches where you are as a business. If you have £50,000 of seed money, it is out of the question.”
Rise of the clusters
How do you solve the problem of rising property costs for start-ups? According to Juliette Morgan, head of property at Tech City UK and partner at Cushman & Wakefield’s global technology practice, there is growth potential for tech in London around “the donut” – the outer ring – with opportunities for places like Hammersmith, Imperial West and Croydon where clusters are developing.
Tech London Advocates founder Russ Shaw says flexible working spaces help. “They allow a company to grow without multiple office moves. Camden has some great spaces like Worklife and Interchange,” he says.
“Shoreditch remains a jewel in terms of nightlife and a creative culture but we are seeing excellent companies emerge from other hubs such as Canary Wharf and Croydon. I will always have fond associations with the space around Old Street roundabout but, if other London clusters catch up to Shoreditch, that is not a bad thing.”
Areas such as Stratford, Dalston and Aldgate are also being tagged as ones to watch and co-working schemes such as Central Working in Whitechapel have been praised for facilitating collaboration between big east London corporates and start-ups.
Mark Bolton at Strettons sees Hackney Wick as the next Shoreditch but adds that if fringe areas want to compete, their retail and leisure provision must catch up with that of Shoreditch.
He says: “In 10 years, the Mind Candys are going to be emerging from other areas. Hackney Wick has all the hallmarks needed to help push that area forward, but it is still quite limited in terms of the leisure amenity.”
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