This week Knight Frank became the latest in a string of big firms to launch a dedicated tech and creative business in London in an attempt to tap into what has become a major source of demand.
It has hired James Nicholson as a partner from London Unlimited, JLL’s tech, creative and emerging locations business, which itself launched in the spring.
CBRE, for its part, boasts a Creative London division, which positions itself in similar fashion.
The rationale for each is clear. In the past four years tech, media and telecoms companies have leased 12.5m sq ft of office space in central London.
That compares with just under 8m sq ft for banks and financial services firms and 5.6m sq ft for professional services providers, such as lawyers and accountants, according to Knight Frank data.
That demand has pushed prime rents in tech belt areas such as Shoreditch from around £40 per sq ft for the best space four years ago to around £65 per sq ft today – a 62.5% increase.
City core rents have risen by almost 21% over the same period and are now barely ahead of the fringe.
But can these firms, best known for advising big corporates and selling shiny offices and luxury homes, effectively position themselves to tap into this demand? The fact that each has launched a separately branded division is itself an acknowledgement that these clients want something distinctly different.
“The big real estate agents have great advantages: scale, clout, resources and organisational memory,” says Estates Gazette’s tech columnist Anthony Slumbers.
“However, in the tech world much of this knowledge is not especially helpful. Too much has changed, or is in the process of changing. The mindset is different; this is the world of The Lean Startup. For big agents to remain relevant in this world requires new branding – or more likely a new brand – where the “start-up” is digital by default.”
Key differentiators
Knight Frank believes it has two key differentiators that will help the new business.
First, its residential division has local knowledge of many of the fringe markets that are emerging as creative office locations, says Will Beardmore-Gray, head of Knight Frank’s tenant representation and agency business.
Second, it has the advantage of the Newmark Grubb Knight Frank network in the US, which incorporates Silicon Valley specialist Cornish & Carey. It expects this to provide a good source of demand flowing both ways across the Atlantic, according to head of central London tenant representation Richard Procter.
Nevertheless, Nicholson, who has experience of helping set up a similar team while at JLL, recognises that it will be his own personal relationships with occupiers and landlords in the tech and creative areas which will make or break the credibility upon which success of the new division will largely depend.
JLL’s head of UK office agency Neil Prime says the decision to launch LondonUnlimited was an acknowledgement that the sector required a different approach.
“We didn’t want to be wolves in sheep’s clothing and try to turn a pin-striped City agent into something else. We wanted to create a business that truly empathised with and reflected the characteristics of those markets,” he says.
The approach has helped JLL win instructions on some of the larger City fringe schemes in the past couple of years, including Helical Bar’s Bower and British Land’s Blossom Street, both EC1.
Typically, however, it has been sharing these instructions with niche firms, which until recently were the dominant force in the traditionally unfashionable fringe markets.
Firms like Richard Susskind & Company, Anton Page, Hatton Real Estate, Kontor, Paul Belchak & Company and Strettons have watched as demand for offices has spread north and east from the centre, bringing with it both plentiful new business and increased competition.
Small firms squeezed out?
So is the future for these markets a combination of little and large, or will the small firms be gradually squeezed out?
James Townsend left CBRE to co-found Kontor precisely because he wanted to dedicate his time to serving the tech and creative sector and felt the best way to do that was as a niche firm.
While he applauds some of the new platforms, such as London Unlimited, as having “gone about things the right way”, he argues that the cultural fit is still proving difficult for some of the bigger firms.
Belchak, who has spent 25 years in the City fringe, the past seven running his own firm, believes clients still want expert local knowledge, particularly given the fierce competition for interesting space in the area.
Anton Page founder Chris Antoniou adds: “The big firms are throwing money at it and there is no question they will have an impact on the market.
“However, we have been doing deals here for 25 years and this business is all about relationships – that is the bit that will be difficult for the bigger firms to grasp quickly.”
